In 2015, Boone, Inc. sold 1,000 carpets for $50 each. The carpets carry a 2-year warranty for repairs. Boone estimates that repair costs will average 2% of the total selling price. What is the amount that would be recorded in the warranty liability account as a result of selling the carpets during 2015?

Question

Quizplus · Accepted Answer

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