Hall Company sells merchandise with a one-year warranty. In the current year, sales consist of 3,999 units. It is estimated that warranty repairs will average $13 per unit sold and 30% of the repairs will be made in the current year and 70% in the next year. In the current year's income statement, Hall should show warranty expense of a.$36,391 b.$15,596 c.$0 d.$51,987

Question

Business

Annabel

3 April, 09:46

Hall Company sells merchandise with a one-year warranty. In the current year, sales consist of 3,999 units. It is estimated that warranty repairs will average $13 per unit sold and 30% of the repairs will be made in the current year and 70% in the next year. In the current year's income statement, Hall should show warranty expense of a.$36,391 b.$15,596 c.$0 d.$51,987

+5

Answers (1)

Know the Answer?

Gerald Friedman · Answer 1

d. $51,987

Explanation:

Given:

Number of units sold = 3,999

Warranty repairs = $13 per unit sold

Repairs made the current year = 30%

Repairs to be made next year = 70%

Required:

Find the warranty expense for the current year's income.

Warranty expense is the cost which arises due to repair or replacement of defective products by a company in the same period which the product sales are recorded.

The warranty expense recorded for the current year would be units sold multiplied by cost of warranty repairs per unit.

Thus,

Warrant expense = 3,999 * $13 per unit

= $51,987

In the current year's income statement, Hall should show warranty expense of $51,987