1. On January 1, 2019, EROS Company introduced a new line of products that carries a 3-year warranty against factory defects. The product warranties provide assurance that the new line of products will function as intended based on agreed-upon specifications. Estimated warranty costs related to peso sales are as follows: 2% of sales in the year of the sale, 4% of sales in the year after-sale, and 6% of sales in the second year after sale. Sales and warranty expenditures for the period 2019 to 2021 were as follows: Sales Actual warranty expenditures 2019 P 5,000,000 P 100,000 2020 7,500,00 150,000 2021 10,000,000 200,000 The company's reporting period is a calendar year. How much is the warranty expense for the year 2020? 2.
1. On January 1, 2019, EROS Company introduced a new line of products that carries a 3-year warranty against factory defects. The product warranties provide assurance that the new line of products will function as intended based on agreed-upon specifications. Estimated warranty costs related to peso sales are as follows: 2% of sales in the year of the sale, 4% of sales in the year after-sale, and 6% of sales in the second year after sale. Sales and warranty expenditures for the period 2019 to 2021 were as follows: Sales Actual warranty expenditures 2019 P 5,000,000 P 100,000 2020 7,500,00 150,000 2021 10,000,000 200,000 The company's reporting period is a calendar year. How much is the warranty expense for the year 2020? 2.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 10E
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1. On January 1, 2019, EROS Company introduced a new line of products that carries a 3-year warranty against factory defects. The product warranties provide assurance that the new line of products will function as intended based on agreed-upon specifications.
Estimated warranty costs related to peso sales are as follows: 2% of sales in the year of the sale, 4% of sales in the year after-sale, and 6% of sales in the second year after sale.
Sales and warranty expenditures for the period 2019 to 2021 were as follows:
Sales Actual warranty expenditures
2019 P 5,000,000 P 100,000
2020 7,500,00 150,000
2021 10,000,000 200,000
The company's reporting period is a calendar year.
How much is the warranty expense for the year 2020?
2. If Chimmy Co. issued a 3-year non-interest bearing note in exchange for an equipment for P 1,000,000, which of the following is correct related to the recognition of the note? (market rate of interest for a similar type of notes is 10%)
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