During 2013, Salton Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 1% of sales in the year of sale, 3% in the year after sale, and 4% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: (assume the accrual method) What amount should Salton report as a liability at December 31, 2015?
A) $0
B) $14,000
C) $22,000
D) $148,000

Question

During 2013, Salton Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 1% of sales in the year of sale, 3% in the year after sale, and 4% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: (assume the accrual method)  What amount should Salton report as a liability at December 31, 2015?
A) $0 
B) $14,000 
C) $22,000 
D) $148,000

Quizplus · Accepted Answer

The Answer of During 2013, Salton Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 1% of sales in the year of sale, 3% in the year after sale, and 4% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: (assume the accrual method)  What amount should Salton report as a liability at December 31, 2015?
A) $0 
B) $14,000 
C) $22,000 
D) $148,000