On this page
Worked-example setupScope and assumptions
- Cedar Trail Sensors, its records, employees, products, plans, rates, and amounts are fictional and supplied for instruction.
- The $92,000 gross payroll was earned by December 31 and remains unpaid; the supplied $7,200 employer cost is within scope and requires no tax-law research by the learner.
- The $31,800 vacation amount has already passed the plan-term, service, vesting or accumulation, forfeiture, payment-likelihood, and pay-rate gates.
- The standard product coverage is stipulated to be an assurance warranty; a separately sold maintenance plan remains in the Topic 606 service lane and is excluded.
- The $72,000 current provision and $6,000 upward revision are supported estimates; claims settled are $63,000.
- Period
- Annual reporting period ending December 31, 2027
- Units
- US dollars
- Rounding
- Dollar schedules retain full precision and display to whole dollars
Cover sheet: known obligations, different evidence
All four lines are recognized liabilities, but they do not share one measurement model. Payroll follows service cutoff. Vacation follows the stipulated qualifying plan analysis. Warranty follows a supplied assurance scope and population estimate.
Schedule 1: routine accruals
| Accrual | Evidence supplied | Amount |
|---|---|---|
| Gross payroll | Employee service through December 31 | $92,000 |
| Employer payroll costs | Supplied in-scope rate and payroll base | 7,200 |
| Qualifying vacation | Supported plan and service calculation | 31,800 |
| Routine accruals | $131,000 |
The January pay date and later cash settlement do not change the December service period. Withholdings and remittances require their own liability lines; they are not reductions of gross compensation expense.
Schedule 2: assurance-warranty rollforward
The standard defect coverage is stipulated to be assurance. The separately sold maintenance plan remains a service performance obligation and never enters this table.
| Warranty activity | Amount |
|---|---|
| Opening liability | $54,000 |
| Provision for current covered sales | 72,000 |
| Upward estimate revision | 6,000 |
| Claims settled | (63,000) |
| Ending warranty liability | $69,000 |
Current warranty expense is $78,000: the $72,000 provision plus the $6,000 revision. Claims reduce the liability and do not automatically equal expense.
Closing entries
Dr Payroll expense $92,000
Dr Employer payroll-cost expense 7,200
Dr Compensated-absence expense 31,800
Cr Payroll liability $92,000
Cr Employer payroll-cost liability 7,200
Cr Compensated-absence liability 31,800
Dr Warranty expense 78,000
Cr Assurance-warranty liability 78,000
Dr Assurance-warranty liability 63,000
Cr Cash, parts inventory, and payroll 63,000
The $63,000 claim-settlement credit is deliberately aggregated in the illustration; the close file must support its actual cash, parts, and payroll destinations.
Reconciliation and boundary
Routine accruals of $131,000 plus the $69,000 ending warranty liability produce $200,000 of recognized current liabilities in this bounded schedule. The check does not establish payroll-tax law, leave-plan qualification, warranty scope, claim assumptions, or disclosure compliance.
Quantitative companions
Choose from 2 ways to work with this calculation.
Verified calculation · liability contingency analysis
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- routine accruals
- 3 fields
Inspect data
{
"earned_payroll": 92000,
"earned_vacation": 31800,
"employer_payroll_taxes": 7200
}- warranties
- 1 field
Inspect data
{
"assurance_warranty": {
"claims_settled": 63000,
"current_period_provision": 72000,
"estimate_revision": 6000,
"opening_liability": 54000
}
}Recomputed result
| Measure | Value |
|---|---|
| assurance warranty warranty claims | 63,000 |
| assurance warranty warranty ending liability | 69,000 |
| assurance warranty warranty provision | 72,000 |
| assurance warranty warranty revision | 6,000 |
| earned payroll accrual | 92,000 |
| earned vacation accrual | 31,800 |
| employer payroll taxes accrual | 7,200 |
| gain contingency recognized | 0 |
| gain contingency review count | 0 |
| loss contingency disclosure review count | 0 |
| total additional exposure | 0 |
| total current debt | 0 |
| total ending warranty liability | 69,000 |
| total noncurrent debt | 0 |
| total recognized contingency | 0 |
| total recognized current liabilities | 200,000 |
| total routine accruals | 131,000 |
| total warranty claims | 63,000 |
| total warranty provision | 72,000 |