What amount should nasa report as a balance

Reference no: EM131266137

Question -

During 2012, NASA Co. produced a new line of computers that carry a three-year warranty against manufacturer's defects. Based on industry experience, NASA Co. estimated warranty costs at 1% of sales in the year of sale, 2% in the year after sale, and 3% in the second year after sale. Sales and actual warranty expenditures for the first three-year of operations were as follows:

Year	Sales	Actual Warranty Expenditures (paid in cash)
2012	$300,000	$5,000
2013	750,000	12,000
2014	2,000,000	40,000
Total	$3,050,000	$57,000

Required:

1- Prepare journal entries necessary to record the warranty liability and warranty expenditure in each year.

2- What amount should NASA report as a balance of the Warranty Liability account at December 31, 2014?

Reference no: EM131266137

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