During 2019, Angel Co. introduced a new line of appliances that carry a three-year warranty against manufacturer’s defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 6% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: Sales Actual Warranty Expenditures 2019 P 400,000 P 6,000 2020 1,000,000 30,000 2021 1,400,000 90,000 P2,800,000 P126,000 assume that sales and repairs occurs evenly through-out the year, how much is the estimated warranty liability at December 31, 2021?
During 2019, Angel Co. introduced a new line of appliances that carry a three-year warranty against manufacturer’s defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 6% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows:
Sales Actual Warranty Expenditures
2019 P 400,000 P 6,000
2020 1,000,000 30,000
2021 1,400,000 90,000
P2,800,000 P126,000
assume that sales and repairs occurs evenly through-out the year, how much is the estimated warranty liability at December 31, 2021?
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