Question
Helpi Auto Parts Ltd. offers a six-month warranty on parts that the company has installed. This warranty ensures that parts are working as intended. The
Helpi Auto Parts Ltd. offers a six-month warranty on parts that the company has installed. This warranty ensures that parts are working as intended. The warranty covers the cost of parts, plus labour for repairs. Warranty costs are estimated to be 1.5% of sales for parts plus 3% of sales for labour. On 1 April, the warranty liability had a $21,000 credit balance. Warranty work in April consumed $9,950 of parts and $15,250 of labour. Sales amounted to $734,000 in April.
Required: 1. What amount of warranty expense should be recorded in April?
2. What is the balance in the warranty provision at the end of April?
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