Carpenter Inc.had a balance of $80,000 in its quality-assurance warranty liability account as of December 31,2015.In 2016,Carpenter's warranty expenditures were $445,000.Its warranty expense is calculated as 1% of sales.Sales in 2016 were $40 million.What was the balance in the warranty liability account as of December 31,2016?

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Quizplus · Accepted Answer

Warranty expense = 1% of sales = 0.01 * $40,000,000 = $400,000Warranty liability = Beginning balance + Warranty expense - Warranty expenditures= $80,000 + $400,000 - $445,000 = $35,000