: Question Help Myron, Inc., manufactures and sells computer monitors with a thr

Question

: Question Help Myron, Inc., manufactures and sells computer monitors with a three-year warranty Warranty costs are expected o average 7% of sales during the warranty period. The following table shows the sales and actual warranty payments during the first two years of operations ofsalesdringthewamantypend. The click eion to the salesaresactualwarrarampayments uringthe sttwo yearsatpersoane (Click the icon to view the sales and actual warranty payments during the first two years of operations.) Based on these facts, what amount of warranty liability should Myron, Inc., report on its balance sheet at December 31, 2017? OA. $46,500 OB. $91,000 OC. $40,000 OD. $44,500 Data Table Sales Warranty Payments Year 2016 500,000 $4,500 2017 800,000 40,000 Print Done

Explanation / Answer

Hence, Myon , Inc. should record $46,500 as warranty liability in its balance sheet as at December 31, 2017.

Hence, correct option is (A) i.e. $46,500

Year Sales Warranty costs(i) Warranty payments(ii) Warranty liability(i) - (ii) 2016 $500,000 500,000 x 7% = $35,000 $4,500 $30,500 2017 $800,000 800,000 x 7% = $56,000 $40,000 $16,000 Total $46,500

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