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Question - Waymire Company sells a motor that carries a 60-day unconditional warranty against product failure. Waymire estimates that between the sale and lapse of the product warranty, 2% of the 39,000 units sold this period will require repair at an average cost of $50 per unit. The warranty liability for this product had a beginning-of-period balance of $30,000, and $27,000 has already been spent on warranty repairs and replacements during the period.
Required - How much warranty expense must Waymire report in its income statement and what amount of warranty liability must it report on its balance sheet for this year?
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