Exhibit 9-2 In 2015, the Magtag Company sold 16,000 ovens. Magtag estimated that 14% of the machines would require repairs under the two-year assurance-type warranty at an average cost of $60. During 2015, Magtag had an actual outlay of $62,000 for repairs under warranty. Magtag uses the GAAP approach of accruing warranty expense (and the related liability) in the year of the sale. Refer to
Exhibit 9-2. What amount should the company report for estimated liability under warranties at the end of 2015?
A) $72,400
B) $62,000
C) $48,000
D) $84,000
A
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