Question

In 2015 Noah, Inc’s car sales were $682,700, and the company expects to have warranty costs of 4% of sales. However, in 2016, the company changes its estimate to 3% of sales. The car sales in 2016 were $603,400 with $18,693 warranty expenditures.

What is the ending balance in estimated warranty payable in 2016?

Please show all steps and how you got each number

Answer 1

Solution:
	CALCULATION OF WARRANTY PROVISSION AND EXPENSES OF THE YEAR 2015 & 2016
	Car Sales for the year 2015	$               6,82,700
	Estimated Warranty Expenditures = 4% of $682,700	$                  27,308
	Beginning balance of Estimated Warranty Expenses of the year 2016 =	$                  27,308
	Add:
	Estimated warranty Liability of 2016 (3 % of $ 603,400)	$                  18,102
	Total	$                  45,410
	Less: Warranty Expenditures of the year 2016	$                  18,693
	Ending balance of estimated warranty payable for the year 2016=	$                  26,717
	Answer = $ 26,717