Warranties

Kim$$s Athletics sells bicycles and other sports and athletic equipment. Sales and expected warranty claims for the year are as follows:

Item Unit Sales Expected Warranty Claims

for Warranty Period Cost per Claim

Mountain bikes $1,1001$ claim per $100$ sold $$74$

Racing bikes $60010$ claims per $100$ sold $40$

Snowboards $1,8004$ claims per $100$ sold $45$

Required:

Question Content Area

$1.$ Prepare the entry to record warranty expense for Kim$$s for the year. If an amount box does not require an entry, leave it blank.

Dec. $31$

$($Record warranty expense$)$

Question Content Area

$2.$ Conceptual Connection: Why does Kim$$s have to record a liability for future warranty claims?

Warranties are

$.$ Therefore, companies must record

and a corresponding

if such contingent amounts are

$.$