Analyzing and Computing Accrued Warranty Liability and Expense
Way mire Company sells a motor that carries a 60-day unconditional warranty against product failure. From prior years' experience, Way mire estimates that 2% of units sold each period will require repair at an average cost of $125 per unit. During the current period, Way mire sold 70,000 units and repaired 1,000 of those units.
(a) How much warranty expense must Way mire report in its current period income statement?
$_____
(b) What warranty liability related to current period sales will Way mire report on its current period-end balance sheet? (Hint: Remember that some units were repaired in the current period.)
$______