Panther Co. had a quality-assurance warranty liability of $350,000 at the beginning of 2018 and $310,000...
Panther Co. had a quality-assurance warranty liability of $350,000 at the beginning of 2018 and $310,000 at the end of 2018. Warranty expense is based on 4% of sales, which were $50 million for the year. What were the warranty expenditures for 2018?
a)$0.
b) $1,960,000.
c) $2,000,000.
d) $2,040,000.
Homework Answers
Answer:
Warranty expenditure fro the year 2018 as shown below:
| Details | Amount ($) |
| Beginning warranty liability | $350,000 |
| Add: Estimated warranty expense(50,000,000 * 4%) | 2,000,000 |
| Total | $2,350,000 |
| Less: Ending warranty liability | ($310,000) |
| Warranty expenditure | $2,040,000 |
Hence, option d. $2,040,000 is the correct answer.
Working:
Estimated warranty expense = 50,000,000 * 4%
= $2,000,000
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