At the beginning of 2018,Angel Corporation began offering a 1-year warranty on its products.The warranty program was expected to cost Angel 4% of net sales.Net sales made under warranty in 2018 were $180 million.Five percent of the units sold were returned in 2018 and repaired or replaced at a cost of $5.3 million.The amount of warranty expense on Angel's 2018 income statement is:

Question

Quizplus · Accepted Answer

The warranty expense is calculated based on the expected cost of 4% of net sales, which is 4% of $180 million = $7.2 million. This is the amount that should be recognized on the income statement, reflecting the expected cost of fulfilling the warranty obligations.

At the Beginning of 2018,Angel Corporation Began Offering a 1-Year