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1. • CommentAuthorbelavia
   • CommentTimeApr 13th 2007

    
   Can someone please assist me in this question. The right answer is 90,000, but i can't see how that is possible.
   
   In the current year, a company commenced sales of a new product line. The company offers a 5-year warranty on the product. The estimated warranty costs as a percentage of sales by year are: First year of warranty 1% Second year of warranty 2% Third year of warranty 3% Fourth year of warranty 2% Fifth year of warranty 1% The company sold $1,000,000 of the new product in the current year with actual warranty expenditures for the year totalling $40,000. What was the estimated warranty liability on the company's books at the end of the current year?
2. • CommentAuthorabusamak
   • CommentTimeApr 14th 2007

    
   hello,
   it was very simple
   look,
   1+2+3+2+1% =9%
   1,000,000* 9%= 90,000$
   when u establesh a warranty liabilites:
   Dr. Warranty expense 90,000
   Cr. Warranty liabilites 90,000
   
   when u actually spend to warranty:
   Dr. Warranty libilites 40,000
   Cr. ripier part, cash.... 40,000
   
   this warranty spicfic to current year.
   good luck
3. • CommentAuthorbelavia
   • CommentTimeApr 15th 2007

    
   So then it should be 50,000 at year end, not 90,000.