Hall Company sells merchandise with a one-year warranty. In the current year, sales consisted of 4,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in the current year and 70% in the next year. In the current year's income statement, Hall should show warranty expense of
A) $45,000
B) $13,500
C) $31,500
D) $0

Question

Quizplus · Accepted Answer

Warranty expense = Sales units × Average warranty repairs = 4,500 units × $10 = $45,000

Hall Company Sells Merchandise with a One-Year Warranty