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3. Western warrants most products it sells against defects in materials and workmanship for a period of a year. Based on their experience with previous
3. Western warrants most products it sells against defects in materials and workmanship for a period of a year. Based on their experience with previous product introductions, warranty costs are expected to approximate 2% of sales. A warranty liability of $39 million was reported at December 31, 2017. Sales of warranted products during 2015 were $2,100 million and actual warranty expenditures were $40 million.
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1. Determine the appropriate means of reporting each situation.
2. In a memo to the audit manager , Mitch Riley, explain your reasoning.
Include any necessary journal entries and drafts of appropriate disclosure notes.
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