In 2013,Minter Co.sold 150 hot air balloons at $4,000 each.The balloons carry a 5-year warranty for defects.Minter estimates that repair costs will average 4% of the total selling price.The estimated warranty liability at the beginning of the year was $14,000.$20,000 in claims was actually incurred during the year to honor their warranty.What was the warranty expense for 2013?

Question

Quizplus · Accepted Answer

Warranty expense for 2013 can be calculated as:

Warranty expense = Estimated warranty liability at the beginning of the year + Actual warranty claims incurred during the year - Warranty repair costs

= $14,000 + $20,000 - (4% of $4,000 x 150)
= $14,000 + $20,000 - $24,000
= $10,000

Therefore, the warranty expense for 2013 was $10,000, which is option D.