On October 10,2013,Printfast Company sells a commercial printer for $2,350 with a one-year warranty that covers parts.Warranty expense is projected to be 4% of sales.On February 28,2014,the printer requires repairs.The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair.
-What is the warranty liability for this printer at the end of 2013?
A)$49.00
B)$84.80
C)$94.00
D)$0,there is no liability at the end of 2013
E)$230.00

Question

Quizplus · Accepted Answer

The warranty liability is the estimated cost of repairs that will be covered under the warranty. Since the warranty expense is projected to be 4% of sales and the printer was sold for $2,350, the warranty liability at the end of 2013 is:
$2,350 x 4% = $94.00
Therefore, the correct answer is C. Option A is too low, Option B is the amount of the repair costs only, Option D is incorrect because there is a liability, and Option E is the selling price of the printer.

On October 10,2013,Printfast Company Sells a Commercial Printer for $2,350