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During 2006, Blass Co. introduced a new product carrying

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Question;Please provide detailed steps to solve this problem, thanks.During 2006, Blass Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 4.55% within 12 months following sale and 5.45% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2006 and 2007 are as follows:Actual WarrantySales Expenditures2006 $ 400,000 $18,0002007 500,000 30,000At December 31, 2007, Blass should report an estimated warranty liability ofa. 21,800b. 22,750c. 42,000d. 90,000the correct answer is C. 42,000.

 

Paper#42087 | Written in 18-Jul-2015

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