Question

At the beginning of 2021, Angel Corporation began offering a two-year warranty on its products. The warranty program was expected to cost Angel 5% of net sales. Net sales made under warranty in 2021 were $194 million. Fifteen percent of the units sold were returned in 2021 and repaired or replaced at a cost of $4.40 million. The amount of warranty expense on Angel's 2021 income statement is:

Answer 1

Answer:

$9.7 million

Explanation:

The amount of warranty expense on Angel's 2021 income statement = Net sales x 5%

= $194 million x 5%

= $9.7 million

Thus, the amount of warranty expense on Angel's 2021 income statement will be $9.7 million