In 2015, Morton Co.sold 100 hot air balloons at $4,000 each.The balloons carry a 5-year warranty for defects.Morton estimates that repair costs will average 4% of the total selling price.The estimated warranty liability at the beginning of the year was $42,000.$11,000 in claims was actually incurred during the year to honor their warranty.What was the balance in the ending estimated warranty liability at the end of the year?

Question

Quizplus · Accepted Answer

The estimated warranty liability is calculated as follows: Initial liability ($42,000) + New estimated liability (4% of $400,000, which is $16,000) - Actual claims ($11,000) = $47,000.