Oak, Co. offer a three-year warranty on its products. Oak previously estimated warranty cost to be 2% of sales. Due to a technological advance in production at the beginning of year 3, Oak now believes 1% of sales to be a better estimate of warranty costs. warranty costs of $80,000 and $ 96,000 were reported in year 1 and year 2, respectively. Sales for year 3 were $5,000,000. what amount should be disclosed in Oak's Year 3 financial statements as warranty expense? a. $ 50,000 b. $ 88,000 c. $ 100,000 d. $ 138,000

Oak, Co. offer a three-year warranty on its products. Oak previously estimated warranty cost to be 2% of sales. Due to a technological advance in production at the beginning of year 3, Oak now believes 1% of sales to be a better estimate of warranty costs. warranty costs of $80,000 and $ 96,000 were reported in year 1 and year 2, respectively. Sales for year 3 were $5,000,000. what amount should be disclosed in Oak's Year 3 financial statements as warranty expense? a. $ 50,000 b. $ 88,000 c. $ 100,000 d. $ 138,000

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

Chapter9: Current Liabilities And Contingent Obligations

Section: Chapter Questions

Problem 10RE

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Kap Co. offers a three year warranty on its products. Kap previously estimated warranty costs to be 2% of sales. Due to a technological advance in production at the beginning of year 3, Kap now believes 1% of sales to be a better estimate of warranty costs. Warranty costs of P800,000 and P960,000 were reported in year 1 and year 2, respectively. Sales for year 3 were P50,000,000. 1. What amount should be presented in Kap's year 3 financial statements as warranty expense?
Oak Co. offers a three-year warranty on its products. Oak previously estimated warranty costs to be 2% of sales. Due to atechnological advance in production at the beginning of 2010, Oak now believes 1% of sales to be a better estimate of warranty costs. Warranty costs of 80,000 and 96,000 were reported in 2008 and 2009, respectively. Sales for 2010 were 5,000,000. What amount should be disclosed in Oak’s 2010 financial statements as warranty expense?a. 50,000b. 88,000c. 100,000d. 138,000
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