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:

Pituitary

A small, pea-sized gland located at the base of the brain, responsible for controlling growth, metabolism, and reproductive functions.

Thymus

An unpaired organ located in the mediastinal cavity anterior to and above the heart.

Adrenal

Pertaining to adrenal glands, which are small glands located above the kidneys that produce hormones like adrenaline and cortisol.

Muscular System

The organ system that allows movement of the body, maintains posture, and circulates blood throughout the body through contraction.