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Question - In 2001, Henning Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to sales are 4% within 12 months following sale and 6% in the second 12 months following sale. Henning Company reported sales of ¥5,000,000 for 2001 and ¥6,000,000 for 2002. The actual expenditures incurred and paid amounted to ¥150,000 for 2001 and ¥550,000 for 2002.
Required -
1. What is the warranty expense for 2002?
2. What is the estimated warranty liability on December 31, 2002?
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