During 2011, Gum Co. introduced a new product carrying a two- year warranty against defects.
The estimated warranty costs related to dollar sales are 2% within 12 months following the sale and 4% in the second 12 months of the sale.
The sale and actual warranty expenditures for the years ended December 31, 2011, and 2012 are as follows:
SalesActual warranty expenditures
2011150,0002,250
2012250,0007,500
Total400,0009,750
What amount should Gum report as warranty expense on its 12/31/2012 Income Statement?
Answers: 2
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During 2011, Gum Co. introduced a new product carrying a two- year warranty against defects.
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