Question

On October 10, 2010, Printfast Company sells a commercial printer for $2,350 with a one year warranty that covers parts. Warranty expense is project to be 4% of sales. On February 28, 2011, the printer requires repairs. The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. What is the warranty liability at the end of 2010

Answer 1

Answer:

zero

Explanation:

printer sales value 2,350

warranty 4% of sales

2,350  x 4% = 94

we recognize

warranty expense 94

   warranty liablity      94

when the customer requires repairs we debit the warranty liablity

waranty liablity         94

Warranty expenses 136

      Invnetory                      80

     Cash                             150

We need to recognize additional expenses to cover the warrant

the warrant liability balance will be zero