Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 34

Other accrued liabilities—warranties Kohl Co. provides warranties for many of its products. The January 1, 2010, balance of the Estimated Warranty Liability account was $70,400. Based on an analysis of warranty claims during the past several years, this year’s warranty provision was established at 0.4% of sales. During 2010, the actual cost of servicing products under warranty was $31,200, and sales were $7,200,000.

Required:

a. What amount of Warranty Expense will appear on Kohl Co.’s income statement for the year ended December 31, 2010?

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b. What amount will be reported in the Estimated Warranty Liability account on the December 31, 2010, balance sheet?

Step 1 of 5

Other accrued liabilities – Warranties:

Accrued liabilities:

It is an accounting word for an expense item that a company has incurred however has not yet paid.

Warranties: