How much is the warranty liability for this copier

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Reference no: EM133127675

Question - On October 6, 2020, Norwood Co., an office equipment supplier, sold a copier for cash of $12,000 (cost $9,400) with a two-year parts and labour warranty. Based on prior experience, Norwood expects eventually to incur warranty costs equal to 5% of the selling price. The fiscal year coincides with the calendar year. On January 15, 2021, the customer returned the copier for repairs that were completed the same day. The cost of the repairs consisted of $198 for the materials taken from the parts inventory and $360 of labour that was fully paid with cash. These were the only repairs required in 2021 for this copier.

Required -

1. How much warranty expense should the company report in 2020 for this copier?

2. How much is the warranty liability for this copier as of December 31, 2020?

Reference no: EM133127675

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