Kim Company sells 2,000 units of its product for $500 each in 2014. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $100 per unit. In 2014, warranty contracts are honoured on 40 units for a total cost of $4,000.
-What amount will be reported on Kim Company's balance sheet as Estimated Warranty Liability on December 31, 2014?
A) $4,000
B) $6,000
C) $2,000
D) cannot be determined

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The Answer of Kim Company sells 2,000 units of its product for $500 each in 2014. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $100 per unit. In 2014, warranty contracts are honoured on 40 units for a total cost of $4,000.
-What amount will be reported on Kim Company's balance sheet as Estimated Warranty Liability on December 31, 2014?
A) $4,000
B) $6,000
C) $2,000
D) cannot be determined

Kim Company Sells 2,000 Units of Its Product for $500