What amount should sam record as warranty expense

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Reference no: EM131977302

Problem

Specialty Appliances and More, Inc. (SAM) has a three-year warranty on their solar refrigerators for defects. Warranty costs are estimated at 2% of sales in year one (the year of the sale), and 5% of sales in each of the following two years. The warranty expires at the end of the third year. Annual sales and actual warranty repair costs were as follows:

	sales	Actual Warranty Cost
year 1	$275,000	$27,500
year 2	$350,000	$17,500
year 3	$425,000	$30,000
total	$1,050,000	$75,000

What amount should SAM record as warranty expense in the first three years?

Reference no: EM131977302

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