compute an independent estimation of the accrued product warranty liability as of December 31, 2001. since this figure will be an estimate, a audit document to indicate exactly how the estimation was derived. Also, indicate whether or not the $45,465 figure reported for accrued product warranty is reasonable. (Hint: Remember the matching and the periodicity accounting principles)
MONTH 2000 SALES FOR MONTH REPAIR EXPENSE FOR MONTH January $532,000 $3,03 February 316,000 3,018 March 359,000 4,691 April 479,000 4,439 May 486,000 3,005 June 414,000 3,049 July 371,000 2,866 August 460,000 2,648 September 442,000 4,116 October 533,000 3,804 November 586,000 3,542 December 800,000 3,730 MONTH SALES FOR MONTH REPAIR EXPENSE FOR MONTH 2001 January $610,500 $4,313 February 381,000 4,750 March 346,000 3,973 April 557,000 4,439 May 590,000 4,818 June 409,000 4,449 July 422,000 4,075 August 550,000 3,542 September 511,000 4,181 October 602,500 5,206 November 642,000 4,830 December 874,000 4,741Exhibit 2-1 Sunset Electronics Company SUMMARY OF PRODUCT WARRANTY EXPENSE (Prepared byClient] January, 2000 through December, 2001 January February March April MONTH 2000 2000 2000 2000 Sales for Month $532,000 $316,000 $359,000 $479,000 Returns During Month1 Current Month Sales 193 137 177 222 1 Month Old Sales 445 533 388 329 2 Month Old Sales 599 693 83 319 3 Month Old Sales 555 423 1,287 875 4 Month Old Sales 570 658 986 1,188 5 Month Old Sales 328 289 763 1,021 6 Month Old Sales 323 285 253 485 Total $3,013 $3,018 $4,691 $4,439 May June July August MONTH 2000 2000 2000 2000 Sales for Month $486,000 $414,000 $371,000 $460,000 Returns During Month: Current Month Sales 147 61 256 284 1 Month Old Sales 369 514 276 313 2 Month Old Sales 481 480 625 429 3 Month Old Sales 662 658 591 441 4 Month Old Sales 343 320 456 702 5 Month Old Sales 792 571 205 228 6 Month Old Sales 211 445 457 251 Total $3,005 $3,049 $2,866 $2,648September October November December MONTH 2000 2000 2000 2000 Sales for Month $442,000 $533,000 $586,000 $800,000 Returns During Month: Current Month Sales 210 292 469 505 1 Month Old Sales 497 559 583 563 2 Month Old Sales 569 462 629 666 3 Month Old Sales 797 541 639 664 4 Month Old Sales 1,029 735 512 604 5 Month Old Sales 812 698 490 456 6 Month Old Sales 202 517 220 272 Total $4,116 $3,804 $3,542 $3,730 Exhibit 2-1 (continued) January February March April MONTH 2001 2001 2001 2001 Sales for Month $610,500 $381,000 $346,000 $557,000 Returns DuringMonth: Current MonthSales $323 $336 $234 $335 1 Month OldSales 948 969 366 351 2 Month OldSales 657 885 861 397 3 Month OldSales 917 845 1,074 915 4 Month OldSales 594 625 798 1,201 5 Month OldSales 675 699 500 657 6 Month OldSales 199 391 140 583 Total $4,313 $4,750 $3,973 $4,439 May June July August MONTH 2001 2001 2001 2001 Sales for Month $590,000 $409,000 $422,000 $550,000 ReturnsDuringMonth: From Current MonthSales $421 $368 $599 $251 1 Month OldSales 670 736 442 337 2 Month OldSales 410 766 684 516 3 Month OldSales 580 527 1,054 947 4 Month OldSales 1,023 549 292 718 5 Month OldSales 1,010 808 519 468 6 Month OldSales 704 695 485 305 Total $4,818 $4,449 $4,075 $3,542
