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Please explain how you determined your answer. A corporation offers a two year warranty on its products, that covers repair/replacement of defective products. Analysis based
Please explain how you determined your answer.
A corporation offers a two year warranty on its products, that covers repair/replacement of defective products. Analysis based upon past sales shows that 12% of all units sold during the year will be returned under the warranty at an average repair/replacement cost of $14 each. During the current year, there were 100,000 units sold at a price of $325 each. The estimated warranty liability account had a normal balance of $120,000 at the beginning of the current year and the company incurred $150,000 in actual expenditures to repair/replace their products under the warranty during the year. Given these facts the warranty expense reported by the corporation would be: $150,000 $138,000 $0 $168,000Step by Step Solution
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