Question

Clinicke Inc. sells merchandise of $800,000 in 2020 that includes a two-year limited warranty against manufacturing defects as part of the selling price. Warranty costs are estimated to be 1% of sales. If the company incurred $2,200 of actual costs in responding to warranty claims in 2020 (related to 2020 sales), how much should Clinicke record in warranty expense for 2020

Answer 1

the amount recorded in the warranty expense is $8,000

Step-by-step explanation:

The computation of the amount recorded in the warranty expense is shown below:

= Sale value of merchandise inventory × estimated percentage

= $800,000 × 1%

= $8,000

hence, the amount recorded in the warranty expense is $8,000

So the above formula should be applied