Accounting · Provisions and Contingencies
Rustforce sells a product line with a 12-month warranty. Repairs cost $20, replacements cost $70. Based on past experience, 6% of items sold will be repaired and 2% will be replaced. At 1 January 20X4, the warranty provision was $24,800. During the year to 31 December 20X4, Rustforce sold 8,550 items and incurred $26,100 in warranty expenditures. For the year ended 31 December 20X4, how much should be expensed in the statement of profit or loss in respect of the product warranty?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1$26,100
- 2$24,800
- 3$23,940✓
- 4$22,230
Correct answer
$23,940
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