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McKay Company sells merchandise with a one-year warranty. In Year 1, sales consisted of 1,200 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in Year 1 and 70% in Year 2. In the Year 1 income statement, McKay should show warranty expense of?

Respuesta :

Answer:

$12,000

Explanation:

Given;

Sales in year 1 = 1,200 units

Estimated average warranty repair = $10 per unit sold

Percent of repairs made in year 1 = 30%

Percent of repair made in year 2 = 70%

Now,

The warranty Expenses for the year 1 will be

= Number of units sold ×  Estimated average warranty repair

= 1200 Units × $10 Per Unit

= $12,000

Hence,

Mckay should show warranty expense of $12,000 in year 1

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