Exhibit 9-5 Backhoe Company estimates its annual warranty expense at 4% of annual net sales. The following information relates to the calendar year 2013:
$\begin{array} { l l}
\$ 3,000,000& \text { Net sales Estimated liability under warranties:}\
100,000 & \text { January 1, 2013}\
80,000& \text { December 31,2013 , after year-end adjustment}
\end{array}$

-Refer to Exhibit 9-5. The amount of warranty expense for 2013 is

Question

Exhibit 9-5 Backhoe Company estimates its annual warranty expense at 4% of annual net sales. The following information relates to the calendar year 2013: 
$\begin{array} { l l} 
\$ 3,000,000&  \text { Net sales Estimated liability under warranties:}\
100,000 & \text { January 1, 2013}\
80,000& \text { December 31,2013 , after year-end adjustment}
\end{array}$

-Refer to Exhibit 9-5. The amount of warranty expense for 2013 is

Quizplus · Accepted Answer

The warranty expense for 2013 is $120,000, which is calculated as follows:Warranty expense = 4% x Net sales= 4% x $3,000,000= $120,000

Exhibit 9-5 Backhoe Company Estimates Its Annual Warranty Expense at 4