A new product introduced by Wilkenson Promotions carries a two-year warranty against defects. The estimated warranty costs related to dollar sales are as follows:

Sales and actual warranty expenditures for the years ended December 31, 2010 and 2011, are as follows:

What amount should Wilkenson report as its estimated liability as of December 31, 2011?

Question

A new product introduced by Wilkenson Promotions carries a two-year warranty against defects. The estimated warranty costs related to dollar sales are as follows:

Sales and actual warranty expenditures for the years ended December 31, 2010 and 2011, are as follows:

What amount should Wilkenson report as its estimated liability as of December 31, 2011?

Quizplus · Accepted Answer

The estimated warranty costs related to dollar sales for 2011 is $900,000 * 6% = $54,000. The actual warranty expenditures for 2011 were $32,000. Therefore, the estimated liability as of December 31, 2011, is $54,000 - $32,000 = $22,000.

A New Product Introduced by Wilkenson Promotions Carries a Two-Year