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Accounting: Warranty recognition.

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Awesome Audio Works, Inc. warrants its products for one year. The estimated product warranty is 2% of sales. Assume that sales were $5000,000 for January. In February, a customer received warranty repairs requiring $2,500 of parts.

A. Determine the warranty liability at January 31, the end of the first month of the current year.
B. What accounts are decreased for the warranty work provided in February?

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Solution Summary

The problem deals with estimating the warranty costs and recording same costs in the accounts.

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Awesome Audio Works, Inc. warrants its products for one year. The estimated product warranty is 2% of sales. Assume that ...

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  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
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