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Carpenter Inc
Carpenter Inc. had a balance of $92,000 in its quality-assurance warranty liability account as of December 31, 2020. In 2021, Carpenter's warranty expenditures paid were $457,000. Its warranty expense is calculated as 1% of sales. Sales in 2021 were $41.2 million.
What was the balance in the warranty liability account as of December 31, 2021?
Expert Solution
Computation of the balance in the warranty liability account as of December 31, 2021:-
Ending balance of warranty liability account = Beginning balance of warranty liability account + Warranty expense for 2021 - Warranty expenditure
= $92,000 + ($41,200,000 * 1%) - $457,000
= $92,000 + $412,000 - $457,000
= $47,000
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