Practice Problems - Acct 2331, The University of Houston

Contingent Liabilities Chapter 8

A company estimates the cost of products warranties to be 3% of sales. The beginning balance in Estimated Warranty Liability account is $15,000. Sales for the period was $795,000. During the period, $32,600 was actually paid for warranty related costs. What is the ending balance in the Warranty Liability account?

$6,250
$23,850
$23,750
$17,600
$38,850

Contingent Liabilities - Warranties Chapter 8

A company provides a warranty on its products that it sells to customers. The warranty liability account had $1,200 balance on April 1. The company had sales of $67,000 in April and estimated warranty repairs at 3% of sales. During the month, the company actually paid out $2,400 for warranty repairs.

Determine the April 30 balance in the estimated warranty liability account.

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