Focus Company sells merchandise with a one year warranty. In 2013, sales consisted of 2,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014. In the 2013 income statement, Focus should show warranty expense of

Question

Quizplus · Accepted Answer

The warranty expense for 2013 should reflect the total estimated cost of repairs for all units sold in that year, which is 2,500 units x $10 per unit = $25,000. The timing of the actual repairs does not affect the expense recognition.

Focus Company Sells Merchandise with a One Year Warranty