In the current year, Hanna Company reported warranty expense of $190,000 and the warranty liability account increased by $20,000. What were warranty expenditures during the year?
A)$190,000.
B)$170,000.
C)$210,000
D)$0.

Question

Quizplus · Accepted Answer

Warranty expenditures are the actual costs incurred by the company to fulfill its warranty obligations. 
Here, we know that the warranty expense reported by Hanna Company is $190,000, which means that the company recognized $190,000 as an expense in its income statement. 
However, the increase in the warranty liability account suggests that the actual amount spent on fulfilling warranty obligations during the year was lower than the amount recognized as an expense. 
The increase in the liability account means that the company expects to pay out $20,000 more in warranties in the future than it previously estimated. 
Therefore, the actual warranty expenditures during the year would be $190,000 (expense) - $20,000 (increase in liability) = $170,000. 
Hence, the correct answer is option B.

In the Current Year, Hanna Company Reported Warranty Expense of $190,000