Rotary Tools sells power tools and backs each product it sells with a one-year warranty...
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Accounting
Rotary Tools sells power tools and backs each product it sells with a one-year warranty against defects. Based on previous experience, the company expects warranty costs to be approximately 4% of sales. By the end of the first year, sales are $800,000. Actual warranty expenses incurred so far are $12,000. 1. Does this situation represent a contingent liability?
| Yes | |
| No |
2. Record warranty expense and warranty liability for the year based on 4% of sales
3. Record the actual warranty expenditures of $12,000 incurred so far
4. What is the balance in the Warranty Liability account after the entries in parts 2 and 3?
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