During 2017, Smith Electronics sold 250 microwaves each at $950 per unit. Eachmicrowave has one year warranty. In Smith estimate, it will cost them $62 per unit, if a unit is brought in under warranty for repair. During 2017, Smith spent $12,500 onwarranty costs for the appliances sold in 2017. At the end of the 2017 the warranty liability and the warranty expense related to these sales would be:

Question

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Smith Electronics estimated a total warranty cost of $15,500 (250 units x $62). They spent $12,500 during 2017, leaving a remaining liability of $3,000 ($15,500 - $12,500). The warranty expense is the total estimated cost of $15,500.

During 2017, Smith Electronics Sold 250 Microwaves Each at $950