During 2021, Eaton Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2021 and 2022 are as follows: Sales Actual Warranty Expenditures 2021 P 800,000 P12,000 2022 1,000,000 30,000 P1,800,000 P42,000 At December 31, 2022, Eaton should report an estimated warranty liability of
During 2021, Eaton Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2021 and 2022 are as follows: Sales Actual Warranty Expenditures 2021 P 800,000 P12,000 2022 1,000,000 30,000 P1,800,000 P42,000 At December 31, 2022, Eaton should report an estimated warranty liability of
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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During 2021, Eaton Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2021 and 2022 are as follows:
| Sales | Actual Warranty Expenditures | |
| 2021 | P 800,000 | P12,000 |
| 2022 | 1,000,000 | 30,000 |
| P1,800,000 | P42,000 |
At December 31, 2022, Eaton should report an estimated warranty liability of
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