Kohl Co. provides warranties for many of its products. The January 1, 2013, balance of the Estimated Warranty Liability account was $46,663. Based on an analysis of warranty claims during the past several years, this year's warranty provision was established at 0.82% of sales. During 2013, the actual cost of servicing products under warranty was $39,914, and sales were $4,401,300. Required: a. What amount of Warranty Expense will appear on Kohl Co.'s income statement for the year ended December 31, 2013?

Warranty Expense that will appear on Kohl Co.'s income statement for the year ended December 31, 2013 is $36,091.

Explanation:

Income statement is prepared on the accrual or matching principle of accounting.

According to the matching principle expenses and revenues are recognized when they are incurred or occur not when received or paid.

The Estimated Warranty Liability of $46,663 was already included as expense in the previous years and no expense on this is to be recognized in 2013.

We only recognize the warranty expense of 2013 as follows

Warranty Expense (debit)

Estimated Warranty Liability (credit)

Warranty Expense = $4,401,300 × 0.82%

                               = $36,090.66

Conclusion :

Warranty Expense that will appear on Kohl Co.'s income statement for the year ended December 31, 2013 is $36,091.

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