At the beginning of the 2021, Titanic Corp. sold 50 units of a merchandise for the year for a total sales price of P3,000,000. These merchandise come with a two year warranty for defects. During the year, the company incurred actual warranty cost at P55,000 Your audit investigation revealed that this transaction was reported in the statement of comprehensive income as Sales at P3,000,000 and warranty expense at P55,000. Assuming that the warranty is considered assurance-type as this is typical to nature of the product being sold, and assuming further that the company estimates that 80% of the units sold shall be returned for the warranty program and that the company shall incur P2,100 in labor and materials cost for each unit returned, what is the correct amount of sales to be reported in the SCI for the period and balance of liability to be reported in the SFP as at the end of 2021? A. 3,000,000 and 84,000. B. 3,000,000 and 29,000 C. 2,880,000 and 29,000 D. 2, 500, 000 and 84,000.
At the beginning of the 2021, Titanic Corp. sold 50 units of a merchandise for the year for a total sales price of P3,000,000. These merchandise come with a two year warranty for defects. During the year, the company incurred actual warranty cost at P55,000 Your audit investigation revealed that this transaction was reported in the statement of comprehensive income as Sales at P3,000,000 and warranty expense at P55,000. Assuming that the warranty is considered assurance-type as this is typical to nature of the product being sold, and assuming further that the company estimates that 80% of the units sold shall be returned for the warranty program and that the company shall incur P2,100 in labor and materials cost for each unit returned, what is the correct amount of sales to be reported in the SCI for the period and balance of liability to be reported in the SFP as at the end of 2021? A. 3,000,000 and 84,000. B. 3,000,000 and 29,000 C. 2,880,000 and 29,000 D. 2, 500, 000 and 84,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At the beginning of the 2021, Titanic Corp. sold 50 units of a merchandise for the year for a total sales price of P3,000,000. These merchandise come with a two year warranty for defects. During the year, the company incurred actual warranty cost at P55,000 Your audit investigation revealed that this transaction was reported in the statement of comprehensive income as Sales at P3,000,000 and warranty expense at P55,000.
Assuming that the warranty is considered assurance-type as this is typical to nature of the product being sold, and assuming further that the company estimates that 80% of the units sold shall be returned for the warranty program and that the company shall incur P2,100 in labor and materials cost for each unit returned, what is the correct amount of sales to be reported in the SCI for the period and balance of liability to be reported in the SFP as at the end of 2021?
A. 3,000,000 and 84,000.
B. 3,000,000 and 29,000
C. 2,880,000 and 29,000
D. 2, 500, 000 and 84,000.
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