Question

Kohl Co, provides warranties for many of its products. The January 1, 2019, balance of the Estimated Warranty Liability account was $42,635. Based on an analysis of warranty claims during the past several years, this year's warranty provision was established at 0.87% of sales. During 2019, the actual cost of servicing products under warranty was $26,750, and sales were $4.144,400

Required:
a. What amount of Warranty Expense will appear on Kohl Co.'s income statement for the year ended December 31, 2019?
Warranty Expense
Actual warranty expense Estimated warranty expense Warranty Expense
b. What amount will be reported in the Estimated Warranty Liability account on the December 31, 2019, balance sheet? (Amounts to be deducted should be indicated by minus sign.)
Estimated Warranty Liability, 1/1/19 balance
Estimated Warranty Liability 12/31/19 balance

Answer 1

Answer and Explanation:

The computation is shown below;

a. For Warranty Expense

= Sales × Estimated Warranty Percentage%

= $4,144,400 × 0.87%%

= $36,056.28

b)

The amount that should be reported is

Opening Balance of Estimated Warranty Liability Jan. 1, 2019 $42,635

Less: Actual warranty costs in 2019 ($26,750)

Add: Warranty expense accrued in 2019 $35,056

Closing Balance of Estimated Warranty Liability Dec. 31, 2019 $50,941