Chato Company sells electrical goods covered by a one-year warranty for any defects. Of the sales of P70,000,000 for the year, the entity estimates that 3% will have major defect, 5% will have minor defect and 92% will have no defect. The cost of repairs would be P5,000,000 if all the products sold had major defect andP3,000,000 if all had minor defect. What amount should be recognized as a warranty provision? * a. 8,000,000 b. 5,600,000 c. 300,000 d. 190,000

Chato Company sells electrical goods covered by a one-year warranty for any defects. Of the sales of P70,000,000 for the year, the entity estimates that 3% will have major defect, 5% will have minor defect and 92% will have no defect. The cost of repairs would be P5,000,000 if all the products sold had major defect andP3,000,000 if all had minor defect. What amount should be recognized as a warranty provision? * a. 8,000,000 b. 5,600,000 c. 300,000 d. 190,000

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 63P

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