In 2020, Plumpton Company started selling new computer that carried a 2-year warranty against defects Plumpton sold P5,000,000 computers evenly throughout 2020. 50% of the sales are expected to be repaired in 2020 and the rest in 2021. The entity estimated that 80% of the products will have no defects. 5% will have major defects and 15% will have minor defects. If all products were to have major defects the total cost would be 2,000,000. But, if all products were to have minor defects the total repairs would only cost 500,000. The appropriate risk-adjustment factor should be 5% for the probability weighted estimated cash flows. How much is the warranty expense for 2020?
In 2020, Plumpton Company started selling new computer that carried a 2-year warranty against defects Plumpton sold P5,000,000 computers evenly throughout 2020. 50% of the sales are expected to be repaired in 2020 and the rest in 2021. The entity estimated that 80% of the products will have no defects. 5% will have major defects and 15% will have minor defects. If all products were to have major defects the total cost would be 2,000,000. But, if all products were to have minor defects the total repairs would only cost 500,000. The appropriate risk-adjustment factor should be 5% for the probability weighted estimated cash flows. How much is the warranty expense for 2020?
Chapter12: Current Liabilities
Section: Chapter Questions
Problem 9MC: Blake Department Store sells television sets with one-year warranties that cover repair and...
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| In 2020, Plumpton Company started selling new computer that carried a 2-year warranty against defects |
Plumpton sold P5,000,000 computers evenly throughout 2020. 50% of the sales are expected to be repaired in 2020 and the rest in 2021.
The entity estimated that 80% of the products will have no defects. 5% will have major defects and 15% will have minor defects. If all products were to have major defects the total cost would be 2,000,000. But, if all products were to have minor defects the total repairs would only cost 500,000. The appropriate risk-adjustment factor should be 5% for the probability weighted estimated cash flows.
How much is the warranty expense for 2020?
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