Geiss Motorsports sold 50 motorbikes for $1,000 each. The bikes carry a 2-year warranty for repairs. Estimates indicate that repair costs will average 2% of the total selling price. What is the amount that would be recorded in the estimated warranty liability account as a result of selling the bikes?

Question

Quizplus · Accepted Answer

The estimated warranty liability is calculated as 2% of the total selling price of the bikes. The total selling price is 50 bikes * $1,000 = $50,000. Therefore, the estimated warranty liability is 2% of $50,000, which is $1,000.

Geiss Motorsports Sold 50 Motorbikes for $1,000 Each