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How much warranty expense does the company report

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Hitzu Co. sold a copier (that costs $7,500) for $15,000 cash with a two-year parts warranty to a customer on August 16 of Year 1. Hitzu expects warranty costs to be 4% of dollar sales. It records warranty expense with an adjusting entry on December 31. On January 5 of Year 2, the copier requires on-site repairs that are completed the same day. The repairs cost $131 for materials taken from the repair parts inventory. These are the only repairs required in Year 2 for this copier.

Problem 1: How much warranty expense does the company report for this copier in Year 1?

Problem 2: How much is the estimated warranty liability for this copier as of December 31 of Year 1?

Reference no: EM132919069

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