1 2 Given Information:* 3 4 Number of units sold 25.000 5 Estimated units needing warranty 5% 6 Estimated warranty cost per unit $120 7 Portion of units fixed in current year 0% 8 9 10 11 Answers: (a) Estimate number of units 1,250 (b) Estimate future warranty cost $150,000 (c) Record year-end adjusting entry Warranty Expense 150,000 12 Warranty Liability 150,000 13 Alternative: 14 Portion of units fixed in current year 25% 15 16 (d) Alternative: Record year-end adjusting entry Warranty Expense 112,500 17 Warranty Liability 112,500 18 19 20 How would your answers change if management's estimate of warranty work increases to 5% of units sold and the estimated warranty cost per unit increases to $120? 21 22 Insert a different amount in any of the blue cells in the given information to see alternative calculations. 23 24 25