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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

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

Intermediate Accounting: Reporting And Analysis
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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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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