2. During 2020, Joaquin Company introduced a new line of machines that carry a two-year warranty against manufacturer’s defects. Based on industry experience, the estimated warranty cost percentages related to peso sales are as follows: Year of sale 1% Year after sale 6% Sales and actual warranty expenditures for 2020 and 2021 were as follows: Year Sales Actual warranty expenditures 2020 P1,000,000 P54,000 2021 1,400,000 89,000 a. How much is the warranty expense to be recognized in 2020 and 2021, respectively? b. What is the estimated warranty liability as of December 31, 2020 and 2021, respectively?
2. During 2020, Joaquin Company introduced a new line of machines that carry a two-year warranty against manufacturer’s defects. Based on industry experience, the estimated warranty cost percentages related to peso sales are as follows: Year of sale 1% Year after sale 6% Sales and actual warranty expenditures for 2020 and 2021 were as follows: Year Sales Actual warranty expenditures 2020 P1,000,000 P54,000 2021 1,400,000 89,000 a. How much is the warranty expense to be recognized in 2020 and 2021, respectively? b. What is the estimated warranty liability as of December 31, 2020 and 2021, respectively?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2. During 2020, Joaquin Company introduced a new line of machines that carry a two-year
warranty against manufacturer’s defects. Based on industry experience, the estimated
warranty cost percentages related to peso sales are as follows:
Year of sale 1%
Year after sale 6%
Sales and actual warranty expenditures for 2020 and 2021 were as follows:
Year Sales Actual warranty expenditures
2020 P1,000,000 P54,000
2021 1,400,000 89,000
a. How much is the warranty expense to be recognized in 2020 and 2021,
respectively?
b. What is the estimated warranty liability as of December 31, 2020 and 2021,
respectively?
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