Question

During 2014, Stabler Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 10% of sales. Sales and actual warranty expenditures for the first three-year period were as follows:

Sales Actual Warranty Expenditures
2009 $ 600,000 $ 9,000
2010 1,500,000 45,000
2011 2,100,000 135,000
$4,200,000 $189,000
What amount should Vanpelt report as a liability at December 31, 2016?
a. $0
b. $15,000
c. $204,000
d. $315,000

Answer 1

$210,000

Step-by-step explanation:

In the question 2014,2015 and 2016 sales are missing.

Sticking to the data given, we can work out for 2011 warranty expense and liability

Liability for 2011=2,100,000*10%=$210,000