Key Terms
Example
500 units sold, 5% expected to need warranty repair, average repair cost $200. 500 x 0.05 x $200 = $5,000 warranty liabi
Examples
Lawsuits, warranties, insurance claims, bankruptcy risk.
Estimate method
Multiply expected defect rate by expected repair cost.
US GAAP
Probable means approximately 80% likelihood. Low end of the estimated range is accrued.
Gross income (pay)
Total earnings before any deductions. Net income (pay): take-home pay after all deductions.
Federal income tax
Based on the employee's W-4 form and IRS withholding tables. Varies by individual.
Other involuntary deductions
Wage garnishments, child support, IRS tax levies, bankruptcy judgments.
Employers may also provide voluntary benefits
Health insurance contributions, retirement plan matches, paid leave.