Question

Assume Smart Touch Learning sold​ 10,000 tablet computers in December 2016 that were covered by a​ 2-year warranty. Smart Touch Learning estimates that it will incur warranty costs on these tablets as​ follows: $ 100 of warranty costs in​ 2016, $ 500 in​ 2017, and $ 750 in 2018. Smart Touch Learning will record a warranty expense of

Answer 1

Smart Touch Learning should record a total warranty expense of $1,350, which represents the sum of the estimated warranty costs over the 2-year period for the tablets sold in December 2016.

Step-by-step explanation:

The student's question relates to the manner in which Smart Touch Learning should record its warranty expense for the tablet computers it sold. Given the estimated warranty costs of $100 in 2016, $500 in 2017, and $750 in 2018 for the 10,000 tablets sold in December 2016, Smart Touch Learning should recognize the total estimated warranty expense over the warranty period. Therefore, the company should record a warranty expense of $1,350, which is the sum of the estimated costs for the 2-year warranty period (2016-2018).