Question

The Warm as Toast Company installs furnaces and fireplaces in homes and businesses. Each furnace and fireplace carries a four-year warranty. During 2016, the company had sales of $835,000. Customers paid half of the sales price when they arranged for an installation and the other half when the furnace or fireplace was installed. At year end, $75,600 of the sales amount represented amounts paid for furnaces or fireplaces that were not yet installed and for which the second half of the payment had not yet been received. The cost associated with the sales was $407,400 for the furnaces and fireplaces that had been installed that year. An additional cost of $198,000 was incurred for the labour associated with the installation. The accountant estimated that total future warranty costs associated with the installed items would likely be $46,800 over the next five years.

Answer 1