Panther Co. had a warranty liability of $350,000 at the beginning of 2009, and $310,000 at end of 2009. Warranty expense is based on 4% of sales, which were $50 million for the year. What were the warranty expenditures for 2009?

Question

Quizplus · Accepted Answer

To calculate the warranty expenditures for 2009, we need to use the warranty expense formula: Warranty expense = Sales x Warranty expense rate. 
Warranty expense = $50,000,000 x 4% = $2,000,000 
Then, to find the total warranty expenditures, we need to use the formula: 
Total warranty expenditures = Beginning warranty liability + Warranty expense - Ending warranty liability. 
Total warranty expenditures = $350,000 + $2,000,000 - $310,000 = $2,040,000. 
Therefore, the best answer is D, $2,040,000.