Essay
Florida Keys Construction installs swimming pools. They calculate that warranty obligations are 3% of gross sales. For the year just ending Florida Keys' gross sales were $1,450,000. Due to previous quarter recognitions, the Warranty Liability account has a credit balance of $28,700. Determine the year's total warranty liability and journalize any necessary value to establish the year's liability at December 31st.
Due to sales, $1,450,000, warranty liability is $43,500 ($1,450,000 × 3%). Since $28,700 has already been recognized, $14,800 (or $43,500 - $28,700) must still be recognized.
Correct Answer:
Verified
Correct Answer:
Verified
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