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Eds Athletics sells bicycles and other sports and athletic equipment. Sales and expected warranty claims...

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Accounting

Eds Athletics sells bicycles and other sports and athletic equipment. Sales and expected warranty claims for the year are as follows:

Item Unit Sales Expected Warranty Claims Cost per Claim
for Warranty Period
Mountain bikes 300 3 claims per 100 sold $30
Racing bikes 120 1 claims per 20 sold 75
Snowboards 650 2 claim per 100 sold 20
Required:
1. Prepare the entry to record warranty expense for Eds for the year.
2. Conceptual Connection: Why does Eds have to record a liability for future warranty claims?

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