Warranty liability and expense
Waymire Company sells a motor that carries a 60-day unconditional warranty against product failure. From prior year’s experience. Waymire estimates that 2% of units sold each period will require repair an average cost of $100 per unit. During the current period, waymire sold 60,000 units and repaired 1,000 units.
How much warranty expense must Waymire report on its current period income statement?
What amount of warranty liability related to current period sales will waymire report on its current period end balance sheet? (hint: remember that some units were repaired in the current period)
What analysis issued must we consider with respect to the amount of reported warrant liability?
