Question
Hooli sells computers for $1,500 each. Included in the sales price is a 4-year warranty that requires the company to perform periodic services and to
Hooli sells computers for $1,500 each. Included in the sales price is a 4-year warranty that requires the company to perform periodic services and to replace defective parts. During 2005, the company sold 660 computers. (Assume sales all occur at December 31, 2005). Based on past experience, the company has estimated the total 4-year warranty costs as $50 for parts and $60 for labor. In 2006, Hooli incurred actual warranty costs of $23,000 relative to 2005 computer sales for parts and labor. As of December 31, 2006, what is the balance in the liability account related to 2005 warranties?
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