Estimated warranty liability

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Reference no: EM13787722

During 2010, Eaton Co. introduced a new product carrying a 2-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2010 and 2011 are as follows:

                                                                                    Actual Warranty

                                                            Sales                Expenditures

 

            2010                                         $ 800,000          $12,000

            2011                                         1,000,000         30,000

                                                            $1,800,000        $42,000

At December 31, 2011, Eaton should report an estimated warranty liability of      

$0.

$10,000.

$30,000.

$66,000.

Reference no: EM13787722

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