Norse LLC, an accrual basis computer manufacturer, began offer a two-year warranty on their computers sold in 2021. Based upon 2021 sales they have recorded a warranty liability of $75,000. As of December 31, 20X1, they have paid out $45,000 in expenses honoring warranties, and they estimate that the remaining warranty claims yet to be filed on 2021 sales are$16,000. In 2022, the remaining claims from 20X1 sales that were filed in 2022 turned out to be $ 16,500, all of which were completely repaired within the first four months of the year. What is the allowable warranty expense for tax purposes?
Norse LLC, an accrual basis computer manufacturer, began offer a two-year warranty on their computers sold in 2021. Based upon 2021 sales they have recorded a warranty liability of $75,000. As of December 31, 20X1, they have paid out $45,000 in expenses honoring warranties, and they estimate that the remaining warranty claims yet to be filed on 2021 sales are$16,000. In 2022, the remaining claims from 20X1 sales that were filed in 2022 turned out to be $ 16,500, all of which were completely repaired within the first four months of the year. What is the allowable warranty expense for tax purposes?
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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Norse LLC, an accrual basis computer manufacturer, began offer a two-year warranty on their computers sold in 2021. Based upon 2021 sales they have recorded a warranty liability of $75,000. As of December 31, 20X1, they have paid out $45,000 in expenses honoring warranties, and they estimate that the remaining warranty claims yet to be filed on 2021 sales are$16,000. In 2022, the remaining claims from 20X1 sales that were filed in 2022 turned out to be $ 16,500, all of which were completely repaired within the first four months of the year. What is the allowable warranty expense for tax purposes?
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