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23 On January 1, Year 1, Travel Company introduced a new product that included a...

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Accounting

23

On January 1, Year 1, Travel Company introduced a new product that included a 2-year manufacturers warranty. Travel Company expects warranty costs to be 2% of sales during the first 12 months following the sale and 4% of sales in the second 12 months following the sale. Information for the first two years after product introduction is as follows.

Sales

Warranty Expenditures

Year 1

$1,000,000

$15,000

Year 2

1,200,000

60,000

Determine the amount to be recognized as warranty expense for Year 2.

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