EZ Wheels Corporation manufactures kick scooters. The company offers a one-year warranty on all scooters. During 2017, the company recorded net sales of $1,900 million. Historically, about 4% of all sales are returned under warranty and the cost of repairing and or replacing goods under warranty is about 30% of retail value. Assume that at the start of the year EZ Wheels’ balance sheet included an accrued warranty liability of $16.3 million and at the end of the year, the accrued warranty liability balance was $12.4 million. How much did EZ Wheels pay during the year to repair and/or replace scooters under warranty? this seems like the same question is it not 22.8?

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Asked Jan 31, 2020
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EZ Wheels Corporation manufactures kick scooters. The company offers a one-year warranty on all scooters. During 2017, the company recorded net sales of $1,900 million. Historically, about 4% of all sales are returned under warranty and the cost of repairing and or replacing goods under warranty is about 30% of retail value. Assume that at the start of the year EZ Wheels’ balance sheet included an accrued warranty liability of $16.3 million and at the end of the year, the accrued warranty liability balance was $12.4 million.

 

How much did EZ Wheels pay during the year to repair and/or replace scooters under warranty?

 

this seems like the same question is it not 22.8?

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Expert Answer

Step 1

Amount payable under Warranty is $26.70 million

Computation of amount payable under warranty to repair and/or replace scooters:

Excel spread sheet:

Finance homework question answer, step 1, image 1

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