Patriot Paddleboards sells a paddleboard model that carries a one-year warranty on all included accessories.Past experience indicates that 15% of those sold will have defective accessories within a year and that average repair cost is $20 per paddleboard.If 1,000 were sold this year and 50 have already been repaired under warranty,the entry to record warranty expense for the year would include a debit to:
A)Warranty Expense of $2,000
B)Warranty Liability of $2,000
C)Warranty Liability of $3,000
D)Warranty Expense of $3,000

Question

Quizplus · Accepted Answer

The estimated cost of warranty repairs can be calculated as follows:
(1,000 paddleboards sold) x (15% defective) x ($20 average repair cost) = $3,000 estimated warranty repair cost for the year.
Since 50 paddleboards have already been repaired under warranty, the remaining estimated warranty repair cost for the year is $3,000 - ($20 x 50) = $2,000.
Therefore, the entry to record the warranty expense for the year would include a debit to Warranty Expense for $2,000.

Patriot Paddleboards Sells a Paddleboard Model That Carries a One-Year