Question

7. Panther Co. had a quality-assurance warranty liability of $356,000 at the beginning of 2018 and $313,000 at the end of 2018. Warranty expense is based on 2% of sales, which were $40 million for the year. What were the warranty expenditures for 2018?

Answer 1

Warrant liability opening balance = $ 365,000
Ending warranty liability balance = $ 313,000
Warranty expense is based on 2% of sales which were $ 40 million							$40,000,000
We will solve this question through a ledger account of warranty liability.
Since it is liability it will be a credit balance
Warranty liability
To expenditures (B/f)*	852000		By Opening balance	365000
			By warranty expense	800000
			(40000000*2/100)
To closing balance	313000
	1165000			1165000
* 365000+800000-313000 = 852000