An entity prepares quarterly interim financial reports in accordance with IAS 34. The entity sells goods that are subject to warranty. The company made a provision for warranty in the first quarter of the year 2014 at 5% of sales, as the company in the past experienced a 5% claim on warranty based on sales. However, in the second quarter, a modification in the design of the product resulted to a design fault and the company expected the warranty claims to increase to 10% for the whole year 2014. Sales in the first and second quarters were P10 million and P15 million, respectively. What would be the warranty expense charged in the second quarter’s interim financial statements?
An entity prepares quarterly interim financial reports in accordance with IAS 34. The entity sells goods that are subject to warranty. The company made a provision for warranty in the first quarter of the year 2014 at 5% of sales, as the company in the past experienced a 5% claim on warranty based on sales. However, in the second quarter, a modification in the design of the product resulted to a design fault and the company expected the warranty claims to increase to 10% for the whole year 2014. Sales in the first and second quarters were P10 million and P15 million, respectively. What would be the warranty expense charged in the second quarter’s interim financial statements?
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