Brigham Company sells an electric timer that carries a three-month unconditional warranty against product failure. Based on a reliable statistical analysis, Brigham knows that between the sale and the end of the product warranty period, four percent of the units sold will require repair at an average cost of $40 per unit. The following data reflect Brigham's recent experience:
Oct. NOV DEC DEC 31st total
Units sold 36,000 34,000 45,000 115,000
Known product failures from sales in:
Oct. 320 550 210 1080
NOV. 230 360 590
DEC 410 410
Calculate, and a journal entry to record, the estimated liability for product warranties at December 31. Assume that warranty costs of known failures have already been reflected in the records.
Product Expense Warranty _________ ________
Estimated Liability for Prod warranty _________ ________
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