Question

Barnes Corporation introduces a new e-book reader that carries a two-year warranty against manufacturer's defects. Based on industry experience with similar product introductions, warranty costs are expected to be approximately 10 percent of sales. By the end of the first year of selling the product, total sales are $5 million, and actual warranty expenditures are $100,000. What amount should Barnes report as a liability at the end of the year?

Answer 1

Based on the total sales and the actual warranty liability, the amount that Barnes should report as a liability is $400,000.

How much should Barnes report?

This can be found as:

= (Total sales x Warranty cost percentage) - Actual warranty expenditures

Solving gives:

= (5,000,000 x 10%) - 100,000

= 500,000 - 100,000

= $400,000

Find out more on warranty expenses at https://brainly.com/question/14070965.

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