Exhibit 13-2 In 2010, the Markel Company sold 14, 000 washing machines.Markel estimated that 12% of the machines would require repairs under the two-year warranty at an average cost of $50.During 2010, Markel had an actual outlay of $48, 000 for repairs under warranty.Markel uses the expense warranty accrual method.
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Refer to Exhibit 13-2.What amount should the company report for estimated liability under warranties at the end of 2010?

Question

Quizplus · Accepted Answer

The estimated liability is calculated as follows: 14,000 machines x 12% x $50 = $84,000 estimated cost. Actual outlay was $48,000, so the liability at the end of 2010 is $84,000 - $48,000 = $36,000.

Exhibit 13-2 in 2010, the Markel Company Sold 14, 000