Solution-What amount Gum report as estimated warranty

What amount Gum report as estimated warranty liability

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Reference no: EM132597992

Question - During 2015, Gum Co. introduced a new product carrying a two-year assurance-type warranty against defects. Gum Co. uses the expense warranty approach. The estimated warranty costs related to dollar sales are 6%. Sales and actual warranty expenditures for the years ended December 31, 2015 and 2016 are as follows:

	Sales	Actual Warranty Expenditure
2015	$150,000	$2,250
2016	250,000	7,500
	$400,000	$9,750

What amount should Gum report as estimated warranty liability on its December 31, 2016 balance sheet?

a. $7,500

b. $4,250

c. $11,250

d. $14,250

e. $16,500

Reference no: EM132597992

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What amount Gum report as estimated warranty liability

Reference no: EM132597992

Reference no: EM132597992

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