Youngstown Company Sells Merchandise with a One Year Warranty

Youngstown Company sells merchandise with a one year warranty. Sales consisted of 2,500 units in 2013 and 2,000 units in 2014. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2013 and 70% in 2014 for the 2013 sales.Similarly, 30% of repairs will be made in 2014 and 70% in 2015 for the 2014 sales. In the 2014 income statement, how much of the warranty expense shown will be due to 2013 sales?

A) $7,500
B) $17,500
C) $25,000
D) $0
E) $12,500

Correct Answer:

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