Analyzing and Computing Accrued Warranty Liability and Expense Waymire Company s

Question

Analyzing and Computing Accrued Warranty Liability and Expense

Waymire Company sells a motor that carries a 60-day unconditional warranty against product failure. Waymire estimates that between the sale and lapse of the product warranty, 2% of the 49,000 units sold this period will require repair at an average cost of $50 per unit. The warranty liability for this product had a beginning-of-period balance of $30,000, and $27,000 has already been spent on warranty repairs and replacements during the period.

Required
How much warranty expense must Waymire report in its income statement and what amount of warranty liability must it report on its balance sheet for this year?

Total expected warranty costs for current period sales:
$Answer

Ending warranty liability:
$Answer

Explanation / Answer

Total expected warranty costs for current period sales = 49000*50*2%= $49000 Ending warranty liability = 30000+49000-27000= $52000

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