AAA Co. a manufacturer of heavy machinery, grant a 2-year warranty on its products. The estimated liability for product warranty account shows these entries for 2020: Beginning Balance Provision during the year (quarterly accrual) 225,000 200,000 Total 425,000 A review of the company's policy of accounting for warranties revealed that based on the company's past experience, warranty claims averaged 5% on net sales. Moreover, the company provides for a quarterly accrual of the estimated warranties expenditures based on rough estimates. The following additional information is available from the company's records: Gross sales P7,250,000; Sales returns and allowances P150,000; Cost of sales P3,678,000. The cost of sales includes P415,500 cost of servicing the warranty for 2020. What is the correct balance of the estimated liability for product warranty at the end of 2020?

AAA Co. a manufacturer of heavy machinery, grant a 2-year warranty on its products. The estimated liability for product warranty account shows these entries for 2020: Beginning Balance Provision during the year (quarterly accrual) 225,000 200,000 Total 425,000 A review of the company's policy of accounting for warranties revealed that based on the company's past experience, warranty claims averaged 5% on net sales. Moreover, the company provides for a quarterly accrual of the estimated warranties expenditures based on rough estimates. The following additional information is available from the company's records: Gross sales P7,250,000; Sales returns and allowances P150,000; Cost of sales P3,678,000. The cost of sales includes P415,500 cost of servicing the warranty for 2020. What is the correct balance of the estimated liability for product warranty at the end of 2020?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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