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Question - In 2017, ABC Corporation began selling a new line of ski products that carry a 2-year warranty against defects. Based upon past experience with other products, the estimated warranty costs are as follows:
1st year of warranty 2% of sales
2nd year of warranty 5% of sales
Sales and actual warranty expenditures for 2017 and 2018 are presented below:
2017
2018
Sales
$650,000
$400,000
Actual warranty expenditures
$30,000
$25,000
Required - What would be the resulting warranty liability for ABC at the end of 2008?
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