Pavo Real sells a sprinkler that carries a 1-year unconditional warranty against product failure. Pavo...
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Accounting
Pavo Real sells a sprinkler that carries a 1-year unconditional warranty against product failure. Pavo Real estimates that between the sale and the lapse of the product warranty, 3.2% of the total 250,000 units sold this period will require repair or replacement at a cost of 5.50 per unit. A warranty liability 5,000is currently on the balance sheet. How much expense must Pavo Real report in its income statement if 1,000is still needed to cover warranties in the past? What amount of additional warranty liability must it report on its balance sheet for the year?
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