In 2020, KD Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows: First year of warranty 2% Second year of warranty 5% Sales and actual warranty expenditures for 2020 and 2021 are presented below: 2020 2021 Sales P900,000 P1,200,000 Actual warranty expenditures 30,000 60,000 What is the estimated warranty liability at the end of 2021? a. P87,000 b. P24,000 c. P57,000 d. P147,000
In 2020, KD Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows: First year of warranty 2% Second year of warranty 5% Sales and actual warranty expenditures for 2020 and 2021 are presented below: 2020 2021 Sales P900,000 P1,200,000 Actual warranty expenditures 30,000 60,000 What is the estimated warranty liability at the end of 2021? a. P87,000 b. P24,000 c. P57,000 d. P147,000
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter8: Current And Contingent Liabilities
Section: Chapter Questions
Problem 57BE
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In 2020, KD Corporation began selling a new line of products that carry a two-year warranty against defects.
Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows:
First year of warranty 2%
Second year of warranty 5%
Sales and actual warranty expenditures for 2020 and 2021 are presented below:
2020 2021
Sales P900,000 P1,200,000
Actual warranty expenditures 30,000 60,000
What is the estimated warranty liability at the end of 2021?
a. P87,000 b. P24,000 c. P57,000 d. P147,000
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