Determine the balance of warranty liability at december

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Bob the Green is a supplier of high-end lawn mower. For the limited time from July 1 to December 31, Year 7, Bob manufactures and sells 150 units of "type S" lawn mower for $2,500 each. Included in the price of $2,500 is one-year warranty. The company estimates that the average warranty cost for each unit will be $125. The company incurs $8,400 in actual warranty costs from the sale of "type S" lawn mower in Year 7 and $10,500 in Year 8. Bob follows expense approach for the original warranty.

Problem (1) Determine the balance of warranty liability at December 31, Year 8.

Reference no: EM132835367

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