During 2010, Vanpelt Co. introduced a new line of machines that carry a three-year warranty...
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During 2010, Vanpelt Co. introduced a new line of machines that carry a three-year warranty against manufacturers defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 6% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: a. Sales Actual Warranty Expenditures 2010 $ 600,000 $ 9,000 2011 1,500,000 45,000 2012 2,100,000 135,000 $4,200,000 $189,000 What amount should Vanpelt report as a liability at December 31, 2012? a. $0 b. $15,000 c. $204,000 d. $315,000.
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