Question

Bonita manufactures high-end whole home electronic systems. The company provides a one-year warranty for all products sold. The company estimates that the warranty cost is $290 per unit sold and reported a liability for estimated warranty costs $10.6 million at the beginning of this year. If during the current year, the company sold 59000 units for a total of $326 million and paid warranty claims of $12090000 on current and prior year sales, what amount of liability would the company report on its balance sheet at the end of the current year?

Answer 1

Answer:

warrnaty laiblity will be reported at 15,620,000 dollars

Explanation:

beginning + warrantty on units sold - claims = ending

Beginning warrant liability 10,600,000

During the year, the company wll recognize  liablity based on the predetermined rate

ID SOLD 59,000

the warranty per unit is 290

59,000 x 290 = 17,110,000

Then the warranty claims decrease the warrant liability

paid warranty claims 12,090,000

10,600,000 + 17,110,000 - 12,090,000 = 15,620,000