Explain what alvarez income statement should contain

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Question - The following information is available for Alvarez Co regarding the warranty Alvarez offers on the product it sells.

Warranty liability balance at 12/31/20 $147,000

Units of product sold during 2021 100,000

Number of units that failed during 2021 and were returned by customers requesting replacement 1,800

Cash refunds issued to customers during 2021 $109,800

Estimate of units sold that will fail 3%

Cost per unit to refund purchase price to customers that purchased failed units $61

Explain what Alvarez's 2021 income statement should contain relating to warranties and what Alvarez's December 31, 2021 balance sheet should show regarding warranties.

Reference no: EM133155448

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