MapsDuring 2005, Cory Company introduced a new line of machines that carrya two-year warranty against manufacturer's defects. Based on industryexperience, the estimated warranty costs related to peso sales are asfollows:Year of sale4%Year after sale6%Sales and actual warranty expenditures for the years ended December 31,2005 and 2006 were as follows:Actual warrantySalesexpenditures20052006500,000700,000P 15,00047,000Pl,200,000P 62,000What amount should Cory report as its estimated warranty liability atDecember 31, 2006?POb. P16,000c. P42,000d. P58,0002.

The warranty Expenses is recognized and recorded at the time when the sales are made.

Answered: During 2005, Cory Company introduced a…

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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Veneer Company started selling a new product that carried a two-year warranty against defect. Based upon pastexperience with other products, the estimated warranty costs related to peso sales are computed as follows:first year of warranty 3%second year of warranty 5%Total sales and actual warranty repairs for 2019 and 2020 are given below:2019 2020Sales P420,000 P696,000Actual warranty expenditures 14,880 18,000What amount should Veneer report as its estimated warranty liability as of December 31, 2020?Prepare all entries related to the above transactions of Veneer Company.
2. During 2020, Joaquin Company introduced a new line of machines that carry a two-yearwarranty against manufacturer’s defects. Based on industry experience, the estimatedwarranty cost percentages related to peso sales are as follows:Year of sale 1%Year after sale 6%Sales and actual warranty expenditures for 2020 and 2021 were as follows:Year Sales Actual warranty expenditures2020 P1,000,000 P54,0002021 1,400,000 89,000a. How much is the warranty expense to be recognized in 2020 and 2021,respectively?b. What is the estimated warranty liability as of December 31, 2020 and 2021,respectively?
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Matusek Corporation has been experiencing a higher than expected number of warranty claims in the current year, due mainly to less than ideal product design. For this reason, the warranty expense percentage used was changed from 2% to 3% of sales. The warranty expense for the current year was calculated using the new rate of 3% of sales. The controller estimates that if the new rate had been used in the past, an additional $160,000 worth of warranty expense would have been recorded. What journal entry, if any, should Matusek record at the end of the fiscal year ending December 31, 2020?

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