Panther Co.had a quality-assurance warranty liability of $350,000 at the beginning of 2016 and $310,000 at the end of 2016.Warranty expense is based on 4% of sales,which were $50 million for the year.What were the warranty expenditures for 2016?

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Quizplus · Accepted Answer

The warranty expense for 2016 is 4% of $50 million, which equals $2,000,000. The liability decreased by $40,000 ($350,000 - $310,000), indicating that $2,040,000 was spent on warranty claims ($2,000,000 expense + $40,000 decrease in liability).