Question 21

A manufacturing company sells motorcycles with a five-year warranty against manufacturers defects. The manufacturer expects that 0% of the motorcycles sold will prove to be defective in the first year after they are sold, 1% will prove to be defective in the second year, 2% will prove to be defective in the third and fourth years, and 3% will prove to be defective in the fifth year. The average cost to repair or replace a defective unit under the warranty is expected to be $50. The companys sales and warranty costs incurred in its first five years were as follows:

		Units Sold		Actual Costs of Repairs and Replacements under the Warranty Plan
2016		7,400		$600
2017		8,200		$17,000
2018		11,500		$33,200
2019		12,800		$23,400
2020		5,900		$12,000

Calculate the amount that should have appeared in the estimated Warranty Provision account at the end of 2018. Assume the balance in the Warranty Provision account was zero at the beginning of 2016.

Estimated warranty provision account, Dec. 31, 2018

$

Calculate the amount of warranty expense that should have been recognized in 2019.

Warranty expense

$