What is the estimated warranty liability


Problem: In 2017, Concord Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to dollar sales are as follows:

First year of warranty 3%

Second year of warranty 5%

Sales and actual warranty expenditures for 2017 and 2018 are presented below:

2017 2018

Sales $755000 $1054000

Actual warranty expenditures 46000 72000

What is the estimated warranty liability at the end of 2018?

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Accounting Basics: What is the estimated warranty liability
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