Question

Hitzu Co. sold a copier costing $7,500 with a two-year parts warranty to a customer on August 16, 2017, for $15,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2018, the copier requires on-site repairs that are completed the same day. The repairs cost $107 for materials taken from the repair parts inventory. These are the only repairs required in 2018 for this copier. Based on experience, Hitzu expects to incur warranty costs equal to 4% of dollar sales. It records warranty expense with an adjusting entry at the end of each year. 1. How much warranty expense does the company report in 2017 for this copier

Answer 1

$600

Step-by-step explanation:

The computation of the warranty expense for the year 2017 is shown below:

Warranty expense is

= Sales value in dollars × warranty cost percentage

= $15,000 × 4%

= $600

By multiplying the sales value with the warranty cost percentage so that the warranty expense could come and the same is to be considered

Therefore the other items values are not considered as they are not relevant