Charm Company sells 1,000 units of radio sets at P9,000 each for cash. Each radio set is under warranty for one year and the company has estimated from past experience that warranty cost will probably average P500 per unit and that only 60% of the units sold will be returned for repairs. During the year, actual payment incurred for repairs is P180,000. What amount would be recorded as estimated warranty liability at the end of the year?300,000 480,000180,000 120,000

Total estimated warranty expense = Sales units x 60% x warranty cost per unit = 1000 units x 60% x…

Answered: Charm Company sells 1,000 units of…

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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Charm Company sells 1,000 units of radio sets at P9,000 each for cash. Each radio set is under warranty for one year and the company has estimated from past experience that warranty cost will probably average P500 per unit and that only 60% of the units sold will be returned for repairs. During the year, actual payment incurred for repairs is P180,000.

What amount would be recorded as estimated warranty liability at the end of the year?

300,000 480,000
180,000 120,000

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