Question
Whirlpond, Inc. manufactures dishwashers. It guarantees to its customers that the dishwasher will not fail to work properly during the first year, if the customer
Whirlpond, Inc. manufactures dishwashers. It guarantees to its customers that the dishwasher will not fail to work properly during the first year, if the customer uses the dishwasher as it is normally intended.
As part of its guarantee, it provides warranty service such that it will replace or fix any dishwashers that fail in the first year, at no charge to the customer.
Whirlpond estimates that at the end of the year (December 31, 2023) it has 450,000 dishwashers under warranty agreement. Of those 450,000 dishwashers, it estimates that .5% (.005) will fail. The average repair or replace cost is $250 per failed dishwasher.
What is the accrued warranty liability for Whirlpond at December 31, 2023?
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