Hitzu Company sold a copier (that costs ) for cash with a two-year parts warranty to a customer on August
16 of Year 1 . Hitzu expects warranty costs to be of dollar sales. It records warranty expense with an adjusting entry on
December 31 . On January 5 of Year 2 , the copier requires on-site repairs that are completed the same day. The repairs
cost for materials taken from the parts inventory. These are the only repairs required in Year 2 for this copier.
Exercise (Algo) Warranty expense and liability computations and entries LO P4

How much warranty expense does the company report for this copier in Year 1?

How much is the estimated warranty liability for this copier as of December 31 of Year 1?

Ask by Ramos Lyons. in the United States

Dec 08,2024

Question

Hitzu Company sold a copier (that costs ) for cash with a two-year parts warranty to a customer on August
16 of Year 1 . Hitzu expects warranty costs to be of dollar sales. It records warranty expense with an adjusting entry on
December 31 . On January 5 of Year 2 , the copier requires on-site repairs that are completed the same day. The repairs
cost for materials taken from the parts inventory. These are the only repairs required in Year 2 for this copier.
Exercise (Algo) Warranty expense and liability computations and entries LO P4

How much warranty expense does the company report for this copier in Year 1?

How much is the estimated warranty liability for this copier as of December 31 of Year 1?

Ask by Ramos Lyons. in the United States

Dec 08,2024

UpStudy AI · Accepted Answer

To calculate the warranty expense and the estimated warranty liability for the copier sold by Hitzu Company, we can follow these steps:

### 1. Calculate the Warranty Expense for Year 1

The warranty expense is calculated as a percentage of the sales price of the copier.

- **Sales Price of Copier**: $$ \$11,000 $$
- **Warranty Expense Percentage**: $$ 3\% $$

**Warranty Expense Calculation**:
$$
\text{Warranty Expense} = \text{Sales Price} \times \text{Warranty Expense Percentage}
$$
$$
\text{Warranty Expense} = 11,000 \times 0.03 = 330
$$

So, the warranty expense that Hitzu Company reports for this copier in Year 1 is **\$330**.

### 2. Calculate the Estimated Warranty Liability as of December 31 of Year 1

The estimated warranty liability at the end of Year 1 is equal to the warranty expense recognized, as this amount represents the company's obligation to cover future warranty claims.

- **Estimated Warranty Liability**: $$ \$330 $$

Thus, the estimated warranty liability for this copier as of December 31 of Year 1 is **\$330**.

### Summary
1. Warranty Expense for Year 1: **\$330**
2. Estimated Warranty Liability as of December 31 of Year 1: **\$330**
1. Warranty Expense for Year 1: **$330** 2. Estimated Warranty Liability as of December 31 of Year 1: **$330**

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