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2014-07-25
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2019-01-26
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Instructions and Help about Supply Period Warranty For Free

Supply Period Warranty: make editing documents online a breeze

When moving your paperwork online, it's essential to have the PDF editor that meets all your requirements.

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Divide the amount of your actual warranty claims in the most recent year by your total sales in the same year to calculate your warranty claims as a percentage of sales. For example, if you had $1,600 in warranty claims and $80,000 in sales, divide $1,600 by $80,000.
Warranty expense is the cost that a business expects to or has already incurred for the repair or replacement of goods that it has sold. Accrue the warranty expense with a debit to the warranty expense account and a credit to the warranty liability account.
Divide the amount of your actual warranty claims in the most recent year by your total sales in the same year to calculate your warranty claims as a percentage of sales. For example, if you had $1,600 in warranty claims and $80,000 in sales, divide $1,600 by $80,000.
The expense should be reported on the income statement at the time that the sale of the product is reported in order to comply with the matching principle. A related account, Warranty Payable or Warranty Liability is also established at the time of the sale.
Identify the customer contract(s) Identify the performance obligation(s) in the contract. Determine the transaction price. Allocate the transaction price to the performance obligation(s) in the contract.
Accounting for extended warranties by product seller or manufacturer. It is still a liability, similar to standard warranty reserves. However, extended warranties become earned revenues over the coverage effective period and are fully recognized into revenue at the time extended warranty contracts expire.
If you estimate that 1 percent of revenues will pay for warranty costs, multiply $100,000 by 0.01 to find the warranty liability of $1,000. At the start of the accounting period, record the warranty liability. In this example, debit the warranty expense account and credit the warranty liability account for $1,000.
Generally, assurance-type warranties are not considered a separate performance obligation. These types of warranties do not provide an additional good or service to the customer, because the selling entity has effectively provided a guarantee of quality and that the product will meet its agreed-upon specifications.

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