In 2010, the Markel Company sold 14,000 washing machines. Markel estimated that 12% of the machines would require repairs under the two-year warranty at an average cost of $50. During 2010, Markel had an actual outlay of $48,000 for repairs under warranty. Markel uses the expense warranty accrual method.

 

                  Exhibit 2

In 2010, the Markel Company sold 14,000 washing machines. Markel estimated that 12% of the machines would require repairs under the two-year warranty at an average cost of $50. During 2010, Markel had an actual outlay of $48,000 for repairs under warranty. Markel uses the expense warranty accrual method.

Refer to Exhibit 2.  At what amount should the company record warranty expense for 2010?

Answer

		$42,000
		$48,000
		$84,000
		$96,000

          Refer to Exhibit 2. What amount should the company report for estimated liability under warranties at the end of 2010?

Answer

		$36,000
		$42,000
		$48,000
		$84,000

 

 

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