You are a sales manager for a company that sells computers. You earn an annual bonus based on revenue from the number of computers sold each year less related warranty expenses. Actual warranty expenses have varied over the prior five years from a high of 8% of a computer's selling price to a low of 4%. In the past, you have estimated warranty expense on the high end to be conservative. Once a year, you are required to work with the company's accountant to determine the warranty expense accrual for computers sold for the year.

1. Does the warranty accrual decision make an ethical dilemma for you, the sales manager? Explain.
2. Because the warranty expenses vary, what percentage would you choose for the current year? Justify your position.
3. Present the journal entry the accountant would make to record the warranty accrual given your chosen percentage. Assume computer sales are $500,000 for the year.
4. Assume several computers have warranty-covered repairs for a total repair cost of $25,000. Present the journal entry the accountant would make to record these repairs. Additionally, analyze whether your estimated warranty accrual (amount that you determined in Question 2 above) was sufficient to cover the expenditures. If not, explain what you would do to better estimate warranties in the future.

Yes, an ethical dilemma is created by the warranty accrual decision. Since the managers bonus is based off less related expenses, the basis of my thought pattern is the sales manager could accrue a lower warranty, in the hopes of a bigger bonus. As far as the warranty expense, I would choose 8 percent. Reason for me is I would prefer to aim high on the percentage, then project too low. I feel most people might pick 6 percentage, taking the middle number, but for me I would to aim high to cover all basis.

Date	Name	Debit	Credit
1Jan22	Warranty expense Warranty liability	40,000	40,000

Date	Name	Debit	Credit
31Dec22	Warranty Liability Cash	25,000	25,000

The amount is sufficient to pay for the warranty expense. I believe this is because I went over and beyond the average of the past estimates. Of course this theory should be based on past estimates and the market, to include any feedback given along the way.

Works Cited:

Wild, J. J., & Shaw, K. W. (2021).Fundamental Accounting Principles, 25th Edition(VitalSource Bookshelf version). McGraw-Hill Education.

DO NOT answer any of the 1-4 questions. Answer the following questions : Do you agree with the post response as far as whether an ethical dilemma exists in the scenario? What are your thoughts on your classmate's chosen percentage for warranty accruals? Do you agree or disagree with the presented journal entries to record the warranty accrual and to record the warranty-covered costs? Elaborate. Do you have suggestions for your classmates to better estimate warranties in the future? Explain. Support your responses to classmates with additional research and/or examples of your understanding of accounting for warranties. above this based off the post.