What the balance for provision for warranty repairs

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Reference no: EM132526214

Surfcom makes powered surf boats. At the end of the reporting period data provided suggests:

(i) If small defects arise with all of the products that have been sold, the related repair costs would be $3.5 million.

(ii) If significant defects arise with all of the products sold the related costs would be $12 million.

(iii) Based upon past experience within the company and within the industry, it is believed that 75% of all products will have not defects, 15% will have small defects and 10% will have significant defects.

Required:

Question a. Show calculations to determine what the balance for provision for warranty repairs should be.

Question b. What journal entry would be made to record this?

Reference no: EM132526214

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