Landfall Navigation began operations in 2017 and provides a one year warranty on the products it sells. They estimate that 20000 of the 400000 units sold in 2017 will be returned for repairs and that these repairs will cost $8 per unit. The cost of repairing 16000 units presented for service in 2017 was $128000. Landfall should report
A) warranty expense of $32000 for 2017.
B) warranty expense of $160000 for 2017.
C) warranty liability of $160000 on December 31 2017.
D) no warranty obligation on December 31 2017 since this is only a contingent liability.

Question

Quizplus · Accepted Answer

Landfall should report a warranty expense of $160,000 for 2017, calculated as 20,000 estimated returns multiplied by $8 per unit.

Landfall Navigation Began Operations in 2017 and Provides a One