Question

Hitzu co. sold a copier costing $6,500 with a two-year parts warranty to a customer on august 16, 2015, for $13,000 cash. hitzu uses the perpetual inventory system. on november 22, 2016, the copier requires on-site repairs that are completed the same day. the repairs cost $147 for materials taken from the repair parts inventory. these are the only repairs required in 2016 for this copier. based on experience, hitzu expects to incur warranty costs equal to 6% 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 2015 for this copier?

Answer 1

Answer:

$780

Explanation:

Data provided as per the question

Sale value of warranty parts for cash = $13,000

Warranty parts percentage = 6%

The computation of warranty expenses is shown below:-

Warranty expenses = Sale value of warranty parts for cash × Warranty parts percentage

= $13,000 × 6%

= $780

Therefore for computing the warranty expenses we simply multiply the sale value of warranty parts for cash with warranty parts percentage.