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Warranties 4. During Year 3, Salton Co. introduced a new line of machines that carry a three-year warranty sale, 4% in the year after sale,
Warranties 4. During Year 3, Salton Co. introduced a new line of machines that carry a three-year warranty sale, 4% in the year after sale, and 4.75% in the second year after ual against manufacturer's defects. Based on industry experience, warranty costs are estimated at 1.5% of sales in the year of sale. Using the information in the table below about Salton's sales of the new machines and act warranty expenditures, how much should Salton report as Estimated Warranty Liability on their Year 5 balance sheet? Actual Warranty Year Sales Year 3 $2,660,000 Year4 $2,128,000 Years $2,872,800 $53.200 $85,000 $179,000 Asset Retirement Obligations 5. A company buys an oil rig for $1,900,000 on January 1, Year 10. The life of the rig is 20 years and the expected cost to dismantle and clean up the area surrounding the rig at the end of that time is S285.000 (present value at 10% is $42,363). Make the journal entry to record the obligation. 6. Using only the information provided in the previous question, what, if any, expenses should the company record for Year 10 as a result of buying the new oil rig? Page 3
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