BU397 Chapter : ch13_AddProb.pdf
Document Summary
Cranmore corporation manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated warranty costs related to dollar sales are as follows: first year after sale - 2% of sales; second year after sale - 3% of sales; and third year after sale - 4% of sales. Sales and actual warranty expenditures for the first three years of business were: Calculate the amount that cranmore corporation should report as warranty expense on its 20x9 income statement and as a warranty liability on its december 31, 20x9, balance sheet. Assume now that the cfo at cranmore believes that the warranty provision should be discounted. If the relevant discount rate is 6%, calculate the warranty expense for the years 20x7 through 20x8. Assume that all cash flows occur at year-end. The following are selected transactions of ping department store ltd. for the current year ending december 3.
