[Solved] In Western Reviewed Their Estimated Warranty Costs Which at That

Question 105

In Western reviewed their estimated warranty costs which at that time was 5% of sales. This estimated was based upon the warranty accrual method. In 2016 net sales were $3,250,000 they recorded warranty expense of $162,500. Due to some pending changes in product improvement and certain economic factors the company saw a drastic drop in their warranty claims for 2017. The company decided for 2017 to reduce the estimate to 3% of sales. In 2017 Western reported net sales of $3,500,000. Required: 1) How should the company report the change and why? 2) Prepare any necessary journal entries for 2016 or 2017 to account for the change.

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