The balance of the Estimated Warranty Liability account was $28,000 on January 1, 2019, and $36,300 on December 31, 2019. Based on an analysis of warranty claims during the past several years, this year’s warranty provision was established at 2% of sales, and sales during the year were $4,200,000. What amount of warranty expense will appear on the income statement for the year ended December 31, 2019?

Warranty Expenses for year ended December 31, 2019 = $84,000

Explanation:

To compute warranty expense, we have to multiply the sales amount from warranty claims provision:

Warranty expense = 4,200,000 * 2%

Warranty expense = $84,000

Note: The warranty expenses appear on income statement would be same as computed above. The fact that liability account of Estimated Warranty increases is due to the fact that some of the customer still not claimed their Warranty and can claim in future.

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