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Monty Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated warranty costs related to dollar sales
Monty Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated warranty costs related to dollar sales are as follows: first year after sale-3\% of sales; second year after sale 4% of sales; and third year after sale 5% of sales. Sales and actual warranty expenditures for the first three years of business were: (a) Calculate the amount that Monty should report as warranty expense on its 2023 income statement and as a warranty liability on its December 31, 2023 SFP using the assurance-type warranty (expense-based approach). Assume that all sales are made evenly throughout each year and that warranty expenditures are also evenly spaced according to the rates above. Warranty expense $ Warranty liability $
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