During 2017, Blevert Co What Amount Should Blevert Report as a Liability at December

question 51

Multiple Choice

During 2017, Blevert Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 1% of sales in the year of sale, 3% in the year after sale, and 5% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: $\begin{array}{lcc}& \underline{\text {Sales}}& \underline{\text {Actual Warranty Expenditures}}\\2017 & \$500,000 & 8,000 \\2018 & 1,600,000 &20,000 \\2019 &\underline{ 2,300,000} &\underline{ 100,000} \\&\$4,400,000&\$128,000\end{array}$

What amount should Blevert report as a liability at December 31, 2018?

• A) $144,000
• B) $124,000
• C) $161,000
• D) $181,000

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