Adamson Sells a Product with a Four-Year Warranty Additional Data

question 19

Essay

Adamson sells a product with a four-year warranty.Warranty costs are estimated as a percentage of sales as follows:
$\begin{array}{llr} \text { Year of sale} &1\%\\ \text { Year after sale} &1\%\\ \text { Two years after sale } &1\%\\ \text { Three years after sale} &4\%\\\end{array}$
Additional data:
$\begin{array}{ccc}& \text { Watranty } & \\\text { Year } & \text { Sales } & \text { Expenditures }\\2009 & \$ 50,000 & \$ 600 \\2010 & 60,000 & 800 \\2011 & 40,000 & 900 \\2012 & 70,000 & 2.500\end{array}$ Required:
a. If the modified cash method is in use, what would be warranty expense for 2011 ?
b. If the expense warraty acculat method is in use, what woutd be warranty expense for 2011 ?
c. If the expense warraty acculal method is in use, what amount of liability for warranties would be chsclosed on the balance sheet on December 31, 2012?

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Definitions:

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