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What is the amount of the provision for warranty payable

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Reference no: EM132645282

Smart Buy Inc. a publicly-traded company, is an electronic retailer of products such as computers, laptops, and tablets. Smart Buy provides a three-year expense type warranty to repair any manufacturer's defects. Smart Buy estimates that the cost of warranty claims will be 5% of all sales in the year. Total sales for 20X5 were $1.2 million, and the claims for warranty repairs in the year totalled $18,900.

Problem 1: What is the amount of the provision for warranty payable that should be reported on Smart Buy's December 31, 20X5, statement of financial position? The opening balance in the provision for warranty payable account is nil.

a) $18,900

b) $41,100

c) $60,000

d) $78,900

Reference no: EM132645282

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