In Western reviewed their estimated warranty costs which at that time was 5% of sales. This estimated was based upon the warranty accrual method. In 2014 net sales were $3,250,000 they recorded warranty expense of $162,500. Due to some pending changes in product improvement and certain economic factors the company saw a drastic drop in their warranty claims for 2015. The company decided for 2015 to reduce the estimate to 3% of sales. In 2015 Western reported net sales of $3,500,000.
Required:
1) How should the company report the change and why?
2) Prepare any necessary journal entries for 2014 or 2015 to account for the change.

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The Answer of In Western reviewed their estimated warranty costs which at that time was 5% of sales. This estimated was based upon the warranty accrual method. In 2014 net sales were $3,250,000 they recorded warranty expense of $162,500. Due to some pending changes in product improvement and certain economic factors the company saw a drastic drop in their warranty claims for 2015. The company decided for 2015 to reduce the estimate to 3% of sales. In 2015 Western reported net sales of $3,500,000.
Required:
1) How should the company report the change and why?
2) Prepare any necessary journal entries for 2014 or 2015 to account for the change.

In Western Reviewed Their Estimated Warranty Costs Which at That