Use the following information for questions 40-42.
Melman Microscopes Inc. offers a two-year warranty against failure of its products. The estimated liability is 1.5% in the year of sale and 3% in the second year. Sales and actual warranty expense for 2016 and 2017 were:
-The warranty liability on the December 31, 2016 balance sheet was

Question

Use the following information for questions 40-42.
Melman Microscopes Inc. offers a two-year warranty against failure of its products. The estimated liability is 1.5% in the year of sale and 3% in the second year. Sales and actual warranty expense for 2016 and 2017 were: 
-The warranty liability on the December 31, 2016 balance sheet was

Quizplus · Accepted Answer

The warranty liability on the December 31, 2016 balance sheet was $47,500. This is because the warranty liability is a liability that is recorded on the balance sheet to account for the estimated cost of future warranty claims. The warranty liability is calculated by multiplying the estimated percentage of sales that will result in warranty claims by the total sales for the period. In this case, the estimated percentage of sales that will result in warranty claims is 5%, and the total sales for the period are $950,000. Therefore, the warranty liability is $47,500 (5% x $950,000).

Use the Following Information for Questions 40-42