Cupola Awning Corporation introduced a new line of commercial awnings in 2016 that carry a two-year warranty against manufacturers defects. Based on their experience, warranty costs are expected to be 5% of sales. Sales and actual warranty expenditures for the first year of selling the product were: sales = 5,000,000 and actual warranty expenditures = 37,500.
Required:
1) Does this situation represent a loss contingency? how should Cupola account for it?
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Home » Business » Cupola Awning Corporation introduced a new line of commercial awnings in 2016 that carry a two-year warranty against manufacturers defects. Based on their experience, warranty costs are expected to be 5% of sales.