DEF, Inc. sells widgets with a warranty under which customers are covered for the cost of repairs of any

manufacturing defects that become apparent within the first six months after purchase. Hint: this problem may

require FASB Codification research.

Required:

a) Points DEF, Inc. estimates that if defects were detected in all products sold, repair costs would range from:

Low end of range

$2,000,000 Minor repairs

High end of range

$4,000,000 Major repairs 2 Assume no particular outcome within the range of $2 to $4 million is better than another. Prepare

the required journal entry. b) Using the same facts from part a) above, assume DEF, Inc. performs an analysis on the historical data

of returns and estimates (based on historical data) finding that:

Estimated to

be:

Goods sold with no

defects

Goods sold with minor

defects

Goods sold with major

defects Total possible points = 75% of all goods sold 20% of all goods sold 5% of all goods sold Prepare the required journal entry.