Question

Talks-A-Lot, Inc. sells cell phones to customers and expects that 10% of phones sold will be returned for repair under its warranty program. The average repair cost is $71 per phone. For 2021, Talks-A-Lot has sold 550 cell phones and has repaired 11 of them as of December 31, 2021. What amount of warranty liability should be reported at December 31, 2021?

Answer 1

Answer:

Product warrant liability to be reported as on 31.12.2021* is $3.124

*The procedures are attached in a microsof excel document.

Explanation:

This amount will be recognized as a liability only if product warranty amount can be rmeasured reliabily and there is probability that there will be an outflow of funds.

Download xlsx