Question

Hall Company sells merchandise with a one-year warranty. In the current year, sales consisted of 4,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in the current year and 70% in the next year. In the current year's income statement, Hall should show warranty expense of

Answer 1

Answer:

=$ 45,000.00

Explanation:

The income and expense matching principle requires that costs be accounted for in the period in which they were incurred. For warranties, the warranty costs are expensed in the year the product was sold.

For Hall company:

units sold 4500

Depreciation per unit $10 dollar

Total depreciation amount = 4500 x $10

      =$ 45,000.00