Question

Wright Company sells merchandise with a one-year warranty. This year, sales consisted of 2,000 units. It is estimated that warranty repairs will average $15 per unit sold, and 30% of the repairs will be made this year and 70% next year. In this year's income statement, Wright should show warranty expense of?

Answer 1

Answer:

$ 30,000.00

Explanation:

The cost of warranty is expensed the same period the sale is made.  Warranty can be estimated, and expensing them together with sale matches a sale and its relevant cost.

In this case:

Estimated warranty @ $15 dollar per unit sale

total unit sold =2000

Warranty amount = $15 x 2000

   =$ 30,000.00

To be expensed when the sale is made