The following information is available for Nielsen Company after its first year of operations:
Nielsen estimates its annual warranty expense as a percentage of sales. The amount charged to warranty expense on its books was $95,000. Assuming a 40% income tax rate, what amount was actually paid this year for warranty claims?

Question

The following information is available for Nielsen Company after its first year of operations:
 Nielsen estimates its annual warranty expense as a percentage of sales. The amount charged to warranty expense on its books was $95,000. Assuming a 40% income tax rate, what amount was actually paid this year for warranty claims?

Quizplus · Accepted Answer

$95,000 - ($4,000 ÷ .40) = $85,000.

The Following Information Is Available for Nielsen Company After Its