During 2014, Eaton Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 3% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2014 and 2015 are as follows: At December 31, 2015, (assuming the accrual method) Eaton should report an estimated warranty liability of
A) $0.
B) $15,000.
C) $35,000.
D) $43,000.

Question

During 2014, Eaton Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 3% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2014 and 2015 are as follows:  At December 31, 2015, (assuming the accrual method) Eaton should report an estimated warranty liability of
A) $0. 
B) $15,000. 
C) $35,000. 
D) $43,000.

Quizplus · Accepted Answer

The Answer of During 2014, Eaton Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 3% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2014 and 2015 are as follows:  At December 31, 2015, (assuming the accrual method) Eaton should report an estimated warranty liability of
A) $0. 
B) $15,000. 
C) $35,000. 
D) $43,000.