In 2023, Quapau Products introduced a new line of hot water heaters that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 5% of sales revenue. First-year sales of the heaters were $300,000. An evaluation of the company’s claims experience in late 2024 indicated that actual claims were less than expected—4% of sales rather than 5%. Assuming sales of the heaters in 2024 were $350,000 and warranty expenditures in 2024 totaled $12,000, what is the 2024 warranty expense?

In 2023, Quapau Products introduced a new line of hot water heaters that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 5% of sales revenue. First-year sales of the heaters were $300,000. An evaluation of the company’s claims experience in late 2024 indicated that actual claims were less than expected—4% of sales rather than 5%. Assuming sales of the heaters in 2024 were $350,000 and warranty expenditures in 2024 totaled $12,000, what is the 2024 warranty expense?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 10E

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