Question
In the third quarter of 2017, Wallop Co. introduced a new product carrying an eighteen-month warranty against product defects. The total estimated cost of repairing
In the third quarter of 2017, Wallop Co. introduced a new product carrying an eighteen-month warranty against product defects. The total estimated cost of repairing flawed product over the entire 18 months of warranty is estimated at 4.5% of dollar sales with the warranty repairs and associated expenditures occurring evenly over that 18 month period (equating to .25% per month (4.5%/18 months) of expected expenditures). Sales and actual warranty expenditures for the years ended December 31, 2017, 2018, 2019 and 2020 are as follows: Gross Sales Actual Warranty Expenditures Year Revenue 2017 $145,000 $2,900 2018 650,000 30,000 2019 815,000 37,000 2020 900,000 40,000 How much warranty expense should Wallop report for the twelve months ended December 31, 2018? A. $29,250 B. None of the answer choices provided are correct $19,500 D. $30,000 E. $23,125
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