What is the adjustment to retained earnings, Financial Accounting

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What is the adjustment to retained earnings

Problem

Pharoah Company offers a ?ve-year warranty on its products. Pharoah previously estimated warranty costs to be 3% of sales but in 2025 revised this estimate to 1% due to process and quality control improvements. Pharoah reported warranty costs of $76800 on $2560000 in 2023 and $91800 on 553060000 in 2024. Sales revenue for 2025 was $512-$000. What is the adjustment to Retained Earnings in 2025 (ignore income tax considerations)?

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Financial Accounting: What is the adjustment to retained earnings

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