During the current year, Gardner Home Center sold 800 power washers for $350 each. The power washers carry a 2-year warranty for repairs. Estimates indicate that repair costs will average 2% of sales. How much warranty expense should be accrued at the end of the current year as a result of the sales of this product?

Question

Quizplus · Accepted Answer

To calculate warranty expense, we need to multiply the expected repair costs (2% of sales) by the total sales of power washers ($350 x 800). 
2% of $280,000 = $5,600. Therefore, the company should accrue $5,600 for warranty expenses at the end of the current year.

During the Current Year, Gardner Home Center Sold 800 Power