Test: CPA Financial Accounting and Reporting (FAR)

1.

The Truman Company sells 12,500 of microwaves during Year 5. All sales are covered by a warranty through the end of Year 6. Based on past experience, the company expects 4% of microwaves sold to break during Year 6 and expects it will cost $30 to fix each microwave. However, during Year 6, 540 microwaves actually break and they each cost $28 to fix. The company is now preparing comparative financial statements for Years 5 and 6. What amount of warranty expense should be recognized?

$15,000 in Year 5 and $1,120 in Year 6

$0 in Year 5 and $15,120 in Year 6

$14,500 in Year 5 and $620 in Year 5

$15,120 in Year 5 and $0 in Year 6

1/5 questions

0%

Access results and powerful study features!

Take 15 seconds to create an account.
Start now! Create your free account and get access to features like:
  • Full length diagnostic tests
  • Invite your friends
  • Access hundreds of practice tests
  • Monitor your progress over time
  • Manage your tests and results
  • Monitor the progress of your class & students
By clicking Create Account you agree that you are at least 13 years old and you agree to the Varsity Tutors LLC Terms of Use and Privacy Policy.
Learning Tools by Varsity Tutors