10. During 2011, Rex Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales are P6,000,000for 2011 and P10,000,000 for 2012. Actual warranty expenditures are P90,000 for 2011 and P300,000 for 2012. On December 31, 2012, what is the estimated warranty liability? * О а. 570,000 ОБ. 100,000 O c. 450,000 O d. 0

10. During 2011, Rex Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales are P6,000,000for 2011 and P10,000,000 for 2012. Actual warranty expenditures are P90,000 for 2011 and P300,000 for 2012. On December 31, 2012, what is the estimated warranty liability? * О а. 570,000 ОБ. 100,000 O c. 450,000 O d. 0

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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10. During 2011, Rex Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales are P6,000,000for 2011 and P10,000,000 for 2012. Actual warranty expenditures are P90,000 for 2011 and P300,000 for 2012. On December 31, 2012, what is the estimated warranty liability? * a. 570,000 b. 100,000 c. 450,000 d. 0
During 2020, Red Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 4% within 12 months following sale and 6% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2020 and 2021 are as follows: Sales Actual Expenditures2020 P5,000,000 P150,0002021 6,000,000 550,000At December 31, 2021, what would be reported as estimated warranty liability?a. P360,000 b. P400,000 c. P240,000 d. P50,000
During 2022, ABC Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 4% within 12 months following sale and 6% in the second 12 months following sale. The company reported sales of P10,000,000 for 2022 and P12,000,000 for 2023. The actual expenditures for warranties amounted to P300,000 for 2022 and P1,100,000 for 2023. What is the estimated warranty liability on Dec. 31, 2023?
During 2020, Buenas Company introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to peso sales are 4% within 12 months following sale and 6% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2020 and 2021 are as follows: Sales Actual Expenditures P5,000,000 P150,000 6,000,000 550,000 At December 31, 2021, what would be reported as estimated warranty liability? a. P360,000 b. P400,000 c. P240,000 d. P50,000
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During 2014, the company introduced a new product that provides a guarantee for two years in the event of damage. The estimated warranty cost based on sales value is 2% for 12 months and 4% for the following 12 months. Actual sales values and warranty issues for the years ended December 31, 2014 and 2015 are as follows: Sales Guarantee expenditure Actual 2014 $ 800,000 $ 12,000 2015 $ 1,000,000 $ 30,000 Total $ 1,800,000 $ 42,000 As of December 31, 2015, the company must present an estimated warranty obligation of a. $0 b. $10,000 c. $26,000 d. $52,000
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E10-7A Warranty Costs Milford Company sells a motor that carries a 3-month unconditional warranty against product failure. Based on a reliable statistical analysis, Milford knows that between the sale and the end of the product warranty period, three percent of the units sold will require repair at an average cost of $60 per unit. The following data reflect Milford’s recent experience: October November December Dec.31 Total Units sold 23,000 22,000 25,000 70,000 Known product failures from sales in: October 120 180 160 460 November 130…
Cupola Awning Corporation introduced a new line of commercial awnings in 2018 that carry a two-year warrantyagainst manufacturer’s defects. Based on their experience with previous product introductions, warranty costsare expected to approximate 3% of sales. Sales and actual warranty expenditures for the first year of selling theproduct were:Sales Actual Warranty Expenditures$5,000,000 $37,500Required:1. Does this situation represent a loss contingency? Why or why not? How should Cupola account for it?2. Prepare journal entries that summarize sales of the awnings (assume all credit sales) and any aspects of thewarranty that should be recorded during 2018.3. What amount should Cupola report as a liability at December 31, 2018?
Amazing Company provides a warranty with all its products it sells. It estimates that it will sell 1,200,000 units of its product for the year ended December 31, 2021, and that its total revenue for the product will be P100,000,000. It also estimates that 60% of the product will have no defects, 30% will have major defects, and 10% will have minor defects. The cost of a minor defect is estimated to be P5 for each product sold, and the cost for a major defect cost is P15. The company also estimates that the minimum amount of warranty expense will be P2,500,000 and the maximum will be P12,000,000.How much is the Provision for Warranty to be reported at December 31, 2021?