Oak Co. offers a three-year warranty on its products. Oak previously estimated warranty costs to be 2% of sales. Due to a technological advance in production at the beginning of 2010, Oak now believes 1% of sales to be a better estimate of warranty costs. Warranty costs of 80,000 and 96,000 were reported in 2008 and 2009, respectively. Sales for 2010 were 5,000,000. What amount should be disclosed in Oak’s 2010 financial statements as warranty expense? a. 50,000 b. 88,000 c. 100,000 d. 138,000

Oak Co. offers a three-year warranty on its products. Oak previously estimated warranty costs to be 2% of sales. Due to a technological advance in production at the beginning of 2010, Oak now believes 1% of sales to be a better estimate of warranty costs. Warranty costs of 80,000 and 96,000 were reported in 2008 and 2009, respectively. Sales for 2010 were 5,000,000. What amount should be disclosed in Oak’s 2010 financial statements as warranty expense? a. 50,000 b. 88,000 c. 100,000 d. 138,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 10E

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