During 2008, Gum Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2 percent within twelve months following the sale and 4 percent in the second twelve months following the sale. Sales and actual warranty expenditures for the years ended December 31, 2008 and 2009, are as follows: Sales Actual Warranty Expenditures
2008 $150,000 $2,250
2009 250,000 7,500
$400,000 $9,750
What amount should Gum report as estimated warranty liability on its December 31, 2009 balance sheet?
a. $7,500
b. $4,250
c. $11,250
d. $14,250
e. $16,500

d. $14,250

Explanation:

Calculation of the amount that Gum should report as estimated warranty liability on its December 31, 2009 balance sheet

First step

2% within twelve months following the sale + 4 % in the second twelve months following the sale.

Will give us 6%

Second step is to calculate the estimated warranty liability that should be reported

Sales Total of $400,000×6%

=$24,000

Hence,

Estimated warranty liability =$24,000 -Total of actual warranty expenditures of $9,750

Estimated warranty liability=$14,250

Therefore the amount that Gum should report as estimated warranty liability on its December 31, 2009 balance sheet will be $14,250

the investment was $14,174.196

explanation:

a lump sum means that the father of the example made one deposit and leave it be.

we need to know the value of a capital that generated at 4.05% per year during 28 years the sum of $48,613.24

now clearing the formula to solve for capital we got:

and we reach the answer investment = $14,174.20

where is the graph?