In 20X1, Murphy Corp. began a new product line with a 12-month warranty against manufacturer defects. Based on industry experience, Murphy expects warranty costs to be an amount equal to approximately 9% of total sales dollars. During 20X1, total sales were $3,000,000. The costs incurred to satisfy warranty claims in 20X1 were $90,000. Required: Answer the following two questions assuming all required journal entries were properly made in 20X1. 

Question #1: What should Murphy report as the "Warranty Expense" balance on its 20X1 income statement? 

Question #2: What should Murphy report as the "Warranty Liability" balance on its balance sheet at 12/31/X1? 

Answer rating: 100% (QA)

Question 1 To determine the warranty expense reported on Murphy Corps 20X1 income statement we need ... View the full answer