During the current year,Going,Going,Gone sold 100 hot air balloons for $4,000 each.The balloons carry a five-year warranty for defects.It is estimated that repair costs will average 4% of the total selling price.The estimated warranty liability at the beginning of the year was $42,000.Only $11,000 in claims was actually incurred during the year to honour the warranty.What was the balance in the estimated warranty liability at the end of the year?

Question

Quizplus · Accepted Answer

100 balloons F1F1F1S1*F1F1F10 $4,000 F1F1F1S1*F1F1F10 .04 = $16,000 (Estimated expense for 2012)
$42,000 (Beginning balance)+ $16,000 (Estimated expense)F1F1F1S1-F1F1F10 $11,000 (Claims)= $47,000

During the Current Year,Going,Going,Gone Sold 100 Hot Air Balloons for $4,000