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In 2009, Slimon Corporation began selling a new line of products that carries a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to dollar sales are as follows:

First year of warranty 2%
Second year of warranty 5%

Sales and actual warranty expenditures for 2009 and 2010 are presented below:

2009 2010
Sales $300,000 $400,000
Actual warranty expenditures 10,000 20,000

What is the estimated warranty liability at the end of 2010?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M974118

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