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1 April, 08:56

Panther Co. had a quality-assurance warranty liability of $359,000 at the beginning of 2018 and $308,000 at the end of 2018. Warranty expense is based on 3% of sales, which were $44 million for the year. What were the warranty expenditures for 2018?

a. $1,320,000

b. $1,269,000

c. $0

d. $1,371,000

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Answers (1)
  1. 1 April, 09:54
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    d.$1,371,000

    Explanation:

    Given that

    Warranty liability at the beginning of year = $359,000

    Warranty liability at the end of year = $308,000

    Warranty expense = $44 million

    Sales percentage = 3%

    So, the warranty expense = $44,000,000 * 3% = $13,20,000

    So, the warranty expenditures for 2018 is

    = Beginning warranty liability + warranty expense - ending warranty liability

    = $359,000 + $13,20,000 - $308,000

    = $1,371,000
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