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In 2018, Dubious company began selling new line of products that carry a two-year warranty against defects.  Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows:             First year of warranty                         2%             2nd year of warranty                            5% Sales and actual

In 2018, Dubious company began selling new line of products that carry a two-year warranty against defects.  Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows:             First year of warranty                         2%             2nd year of warranty                            5% Sales and actual

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter8: Current And Contingent Liabilities
Section: Chapter Questions
Problem 57BE
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  1. In 2018, Dubious company began selling new line of products that carry a two-year warranty against defects.  Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows:

            First year of warranty                         2%

            2nd year of warranty                            5%

Sales and actual warranty expenditures are presented below:

                                             2018                2019

Sales                            5,000,000        7,000,000

Actual warranty costs    100,000           300,000

            What is the estimated warranty liability on Dec. 31, 2019?

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