EXERCISE 7 Filmore Company started selling a new product that carried a 2-year warranty against defects. The warranty provides assurance that the new product will function as intended based on agreed-upon specifications. Based on past experiences with other products, the estimated warranty costs related to peso sales are computed as follows: First year of warranty 3% Second year of warranty 5% Total sales and actual warranty repairs for 2019 and 2020 are given: 2019 2020 Sales P 4,200,000 P 6,960,000 Actual warranty expenditures 148,800 180,000 REQUIRED: a.) What amount should Fillmore report as its estimated warranty liability as of December 31,2020? b.) Based on the above data, assuming that sales and repairs occur evenly throughout the year, how much would be the predicted warranty expense covering 2019 and 2020 sales still under warranty at December 31,2020?
EXERCISE 7 Filmore Company started selling a new product that carried a 2-year warranty against defects. The warranty provides assurance that the new product will function as intended based on agreed-upon specifications. Based on past experiences with other products, the estimated warranty costs related to peso sales are computed as follows: First year of warranty 3% Second year of warranty 5% Total sales and actual warranty repairs for 2019 and 2020 are given: 2019 2020 Sales P 4,200,000 P 6,960,000 Actual warranty expenditures 148,800 180,000 REQUIRED: a.) What amount should Fillmore report as its estimated warranty liability as of December 31,2020? b.) Based on the above data, assuming that sales and repairs occur evenly throughout the year, how much would be the predicted warranty expense covering 2019 and 2020 sales still under warranty at December 31,2020?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:EXERCISE 7
Filmore Company started selling a new product that carried a 2-year warranty against defects. The warranty
provides assurance that the new product will function as intended based on agreed-upon specifications. Based
on past experiences with other products, the estimated warranty costs related to peso sales are computed as
follows:
First year of warranty
3%
Second year of waranty
5%
Total sales and actual warranty repairs for 2019 and 2020 are given:
2019
2020
P 4,200,000
Actual warranty expenditures 148,800
Sales
P 6,960,000
180,000
REQUIRED:
a.) What amount should Fillmore report as its estimated warranty liability as of December 31,2020?
b.) Based on the above data, assuming that sales and repairs occur evenly throughout the year, how much would
be the predicted warranty expense covering 2019 and 2020 sales still under warranty at December 31,2020?
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