Pinnacle Co., prepares quarterly interim financial reports. The entity sells electric fans and normally 5% of their customers claim on their warranty. The provision in the first quarter was calculated at 5% of sales to date which amounted to 20,000,000. However, in the second quarter, a design fault was found and warranty claims were expected to be 10% for the whole year. Sales for the second quarter amounted to P30,000,000.
Pinnacle Co., prepares quarterly interim financial reports. The entity sells electric fans and normally 5% of their customers claim on their warranty. The provision in the first quarter was calculated at 5% of sales to date which amounted to 20,000,000. However, in the second quarter, a design fault was found and warranty claims were expected to be 10% for the whole year. Sales for the second quarter amounted to P30,000,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Pinnacle Co., prepares quarterly interim financial reports. The entity sells electric fans and normally 5% of their customers claim on their warranty.
The provision in the first quarter was calculated at 5% of sales to date which amounted to 20,000,000.
However, in the second quarter, a design fault was found and warranty claims were expected to be 10% for the whole year. Sales for the second quarter amounted to P30,000,000.
What amount of provision should be charged in the interim income statement for the second quarter?
A. 4,500,000
B. 4,000,000
C. 3,750,000
D. 3,000,000
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