Question

Check my workCheck My Work button is now enabledItem 3 Sony introduces a new compact music player to compete with Apple's iPod 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 3% of sales. By the end of the first year of selling the product, total sales are $29.7 million, and actual warranty expenditures are $170,000. What amount (if any) should Sony report as a liability at the end of the year

Answer 1

$721,000

Step-by-step explanation:

The computation of the liability reported is shown below:

= Warranty liability - actual liability

= ($29,700,000 × 3%) - $170,000

= $891,000 - $170,000

= $721,000

We simply deduct the actual liability from the warranty liability so that the liability amount could come