The following unadjusted balances are taken from the trial balance of Jackson Equipment at December 31, 2014: Jackson Equipment sells and installs security systems. Beginning on December 1, 2014, Jackson began offering a 2-year product warranty. Based on research in the industry, Jackson's management believes that 5% of security systems will require some warranty work and that the typical costs for systems requiring warranty work will be $875 during the first year and $325 during the second year. In December, Jackson supplied and installed 80 systems.
Instructions
a. Calculate and record Jackson's warranty liability at December 31, 2014.
b. Prepare the current liability portion of Jackson's balance sheet at December 31, 2014.

Question

The following unadjusted balances are taken from the trial balance of Jackson Equipment at December 31, 2014:  Jackson Equipment sells and installs security systems. Beginning on December 1, 2014, Jackson began offering a 2-year product warranty. Based on research in the industry, Jackson's management believes that 5% of security systems will require some warranty work and that the typical costs for systems requiring warranty work will be $875 during the first year and $325 during the second year. In December, Jackson supplied and installed 80 systems.
Instructions 
a. Calculate and record Jackson's warranty liability at December 31, 2014.
b. Prepare the current liability portion of Jackson's balance sheet at December 31, 2014.

Quizplus · Accepted Answer

The Answer of The following unadjusted balances are taken from the trial balance of Jackson Equipment at December 31, 2014:  Jackson Equipment sells and installs security systems. Beginning on December 1, 2014, Jackson began offering a 2-year product warranty. Based on research in the industry, Jackson's management believes that 5% of security systems will require some warranty work and that the typical costs for systems requiring warranty work will be $875 during the first year and $325 during the second year. In December, Jackson supplied and installed 80 systems.
Instructions 
a. Calculate and record Jackson's warranty liability at December 31, 2014.
b. Prepare the current liability portion of Jackson's balance sheet at December 31, 2014.

The Following Unadjusted Balances Are Taken from the Trial Balance