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