Question

Panther Co. had a quality-assurance warranty liability of $350,000 at the beginning of 2021 and $310,000 at the end of 2021. Warranty expense is based on 4% of sales, which were $50 million for the year. What amount of warranty costs were paid during 2021

Answer 1

Answer:

$2,040,000

Explanation:

Calculation for the amount of warranty costs paid during 2021

Beginning quality-assurance warranty liability $350,000

Add: Warranty expense $2,000,000

(4%×$50 million)

Less: Ending quality-assurance warranty liability ($310,000)

Warranty cost $2,040,000

Therefore the amount of warranty costs paid during 2021 will be $2,040,000