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 at the end of 2014?
A)$14.00.
B)$84.80.
C)$94.00.
D)$0,there is no liability at the end of 2014.
E)$230.00.

Question

Quizplus · Accepted Answer

Warranty expense is 4% of sales, so the warranty liability is $2,350 x 4% = $94. The repairs cost $80 for parts and $150 for labor, for a total of $230. The warranty liability is reduced by the cost of the repairs, so the warranty liability at the end of 2014 is $94 - $230 = -$136. However, warranty liabilities cannot be negative, so the warranty liability is $0.

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