The company would set up warranty reserves based on the sales %, and then when actual warranty claims happen they are applied against the reserve.
And question is ? What is the liability at the end month or the amount of expense in January or February,
Fungus Audio Works Inc. warrants its products for one year. The estimated product warranty is 3% of sales. Assume that sales were $680,000 for January. In February, a customer received warranty repairs requiring $4,200 of parts.
