12. Chato Company sells electrical goods covered by a one-year warranty for any defects. Of the sales of P70,000,000 for the year, the entity estimates that 3% will have major defect, 5% will have minor defect and 92% will have no defect. The cost of repairs would be P5,000,000 if all the products sold had major defect andP3,000,000 if all had minor defect. What amount should be recognized as a warranty provision? О а. 8,000,000 O b. 5,600,000 О с. 300,000 O d. 190,000

12. Chato Company sells electrical goods covered by a one-year warranty for any defects. Of the sales of P70,000,000 for the year, the entity estimates that 3% will have major defect, 5% will have minor defect and 92% will have no defect. The cost of repairs would be P5,000,000 if all the products sold had major defect andP3,000,000 if all had minor defect. What amount should be recognized as a warranty provision? О а. 8,000,000 O b. 5,600,000 О с. 300,000 O d. 190,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Question: Carrot Company began selling a new generation of cell phones on November 1, 2021. The company offers a 90- day warranty for defective phones. Based on Carrot's experience with previous generations of this phone, they estimate that 2.0% of the units sold will become defective in the warranty period, and that the average cost of replacing or repairing a defective unit is $100. In November, Carrot sold 25,000 units and 500 defective units were returned. In December, Carrot sold 35,000 units and 600 units were returned. The actual cost of replacing the defective units was $110,000. Instructions: a. Prepare a journal entry to accrue for the estimated warranty costs for the November and December sales at December 31, 2021. b. Prepare one summary journal entry at December 31, 2021 to record the cost of replacing the defective cell phones returned during November and December. c. What amounts will be included in Carrot's 2021 income statement and balance sheet at December 31, 2021,…
53. A company sold 8,000 units of its signature product for the calendar year ended December 31, 2020. Each unit is sold at P 45,000, including a one-year warranty on its parts. The company expects 3.50% of the products would be defective and that repair costs would costs them P 2,750.00 per unit. For 2020, 235 units were repaired for a total cost of P 640,375.00. Assuming that the Provision for Warranty account had a beginning balance at January 1, 2020 of P 297,730.00, determine the Provision for Warranty balance as of December 31, 2020.
Kk25.
56 In August 2021, Commonlo Corp. commits to selling 100 of its merchandise to M&H Co. for P30,000 (P300 per product). The merchandise is to be delivered to M&H over the next 6 months. After 60 merchandises were delivered, the contract is modified and Commonlo promises to deliver 80 more products for an additional P21,600 (P270 per station). At year-end, Commonlo delivered an additional 90 products. All sales are cash on delivery. Assume that the additional term is a prospective modification to the original contract. How much revenue will be recognized on the contract for the year 2021?
Company M uses the cost recovery method. During 19A, it sells goods with a cost of $15,000 for $25,000, payable in installments of $10,000, $10,000 and $5,000, respectively, beginning in 19A. How much profit should be recognized each year?
21. A promissory note which is dated January 1, 20A was received from a client for service rendered by the ML Company for P350,000. Its term is 1 year (360 days) and carries with it a 10% interest rate. On the same date, due to financial needs, the company immediately have it discounted to a financial provider at 15% discount. Compute the amount of loss if the discounting arrangement is a conditional sale. Round off final answer to the nearest peso.
10.Pirates PLC sells a line of goods under a six-month warranty. Any defect arising during that period is repaired free of charge. Pirates PLC has calculated that if all the goods sold in the last six months of the year required repairs the cost would be $2 million. If all of these goods had more serious faults and had to be replaced the cost would be $6 millionThe normal pattern is that 80% of goods sold will be fault-free, 15% will require repairs and 5% will have to be replaced. What is the amount of the provision required? Select one alternative: O $1.6 million O $6 million O $2 million O $0.6 million
1. General Motors guarantees automobiles against defects for five years or 160,000 km, whichever comes first. Suppose GM can expect warranty costs during the five-year period to add up to 4% of sales. Assume that Forbes Motors made sales of $2,500,000 on their Buick line during 2020. Forbes received cash for 13% of the sales and took notes receivable for the remainder. Payments to satisfy customer warranty claims totalled $75,000 during 2020. Post to the Estimated Warranty Payable T-account. The beginning balance was $43,000. At the end of 2020, how much in estimated warranty payable does Forbes owe its customers?
4
4. Bonita.com sells 6800 units of its product for $460 each. The selling price includes a one- year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $40 per unit. In the year of sale, warranty contracts are honored on 120 units for a total cost of $4800. What amount should Bonita.com accrue on December 31 for estimated warranty costs? Select answer from the options below a. $8160 b. $32640 c. $ 4800 d. $3360
4. Among the transactions of WRY TO TWIST Company for the first two quarters of 20x1 were the following:a. WRY recognized a ₱200,000 write-down in its inventory during the first quarter. WRY had expected that the write-down will reverse in the second quarter, and in fact, in the second quarter, the recovery exceeded the previous write-down by ₱40,000.b. WRY provides warranty for its sales. In the first quarter, WRY estimated a 5% warranty obligation on its first quarter sales of ₱2,000,000. In the second quarter, a change in accounting estimate was made. It was estimated that the cost of warranty should be 10% of total sales. The second quarter sales amounted to ₱2,400,000.c. WRY has been estimating its bad debt expense as 2% of credit sales. However, in the second quarter, a change was made to the percentage of ending receivable. Under this method, the required balance of the allowance for doubtful accounts as of June 30, 20x1 is computed at ₱60,000. The allowance has a balance of…
kau.6 Calculate the amount of warranty expense that should have been recognized in 2023