Computer Wholesalers restores and resells notebook

computers on eBay It originally #8784

Computer Wholesalers restores and resells notebook computers on eBay.It originally acquires
the notebook computers from corporations upgrading their computer systems, and it backs each
notebook it sells with a 90-day warranty against defects. Based on previous experience,
Computer Wholesalers expects warranty costs to be approximately 5% of sales. By the end of
the first year, sales and actual warranty expenditures are $500,000 and $18,000,
respectively.Required:1. Does this situation represent a contingent liability? Why or why not?2.
Record warranty expense and warranty liability for the year based on 5% of sales.3. Record the
reduction in the warranty liability and the reduction in cash of $18,000 incurred during the
year.4. What is the balance in the Warranty Liability account after the entries in Requirements 2
and 3?View Solution:
Computer Wholesalers restores and resells notebook computers on eBay It originally

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