Question

A company estimates that warranty expense will be 2% of sales. The company's sales for the current period are $146,000. The current period's entry to record the warranty expense is:___.

Answer 1

Warranty expense is the value associated with a faulty product repair, replacement, or refund. A warranty comes with a warranty duration in the course of which the seller or manufacturer of the good is in charge for any defects that can also appear all through the use of the product.

Is warranty an amassed expense?

Expense Warranty (Accrual) approach – if the assurance is inseparable from the product being sold and guarantee charges are probably and can be fairly estimated, accrue these prices as a liability in the 12 months of sale.

When Should assurance fee be recorded?

Therefore, a corporation should report in the duration of the sale the estimated fee of repairing or changing the product at some point of the guarantee period. That expected price is recorded as a liability on its stability sheet and as an fee on its profits statement.

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