During 2016, the Thomas Company began selling a new type of machine that carries a...
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Accounting
During 2016, the Thomas Company began selling a new type of machine that carries a two-year assurance-type warranty against all defects. Based on past industry and company experience, estimated warranty costs should total $2,000 per machine sold. During 2016, sales and actual warranty expenditures were $4,000,000 (80 machines) and $44,000, respectively. Thomas uses the GAAP approach of accruing warranty expense (and the related liability) in the year of the sale.
What amount should Thomas report as its warranty expense for 2016?
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