A Firm Sells a Remarkable Product,which Serves Many Household Purposes

question 42

Essay

A firm sells a remarkable product,which serves many household purposes.The firm is confident about its product and is so anxious to sell a large number of units that it grants a 3-year warranty.The warranty agreement specifies that any malfunction or other problem will be fixed at no cost to the customer,unless the customer has abused the product.Based on experience with other household products it has sold in the past,3% of total units sold will require service over the warranty period at an average cost of $200 per unit.The following information relates to the first two years of the product's life: What is the balance of the warranty liability account at January 1,Year 3? Assume that the company did not revise its estimate of future warranty claims frequency.

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Definitions:

Epidermis

The outermost layer of skin that provides a waterproof barrier and creates our skin tone.

Dermis

The thick layer of living tissue below the epidermis that forms the true skin, containing hair follicles, sweat glands, and other structures.

Appendicular

Pertaining to limbs or appendages of the body, particularly the bones of the limbs and the structures associated with them.

Pelvis

The lower part of the torso in human and many animals, consisting of the hip bones surrounding the pelvic cavity.