Green Company started business in 2020. It sells printers with a three-year warranty. Green estimates its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 2 % will be repaired during the first year of warranty, 4% will be repaired during the second year of warranty and 6% will be repaired in the third year. In 2020 and 2021, the company was able to sell 7,500 units and 8,400 units, respectively at a selling price of P 5,000 per unit. The company also incurred actual repair costs of P530,000 and P 1,176,000 in 2020 and 2021, respectively. What amount should Green report as warranty expense in 2020? A.P 3,970,000
Green Company started business in 2020. It sells printers with a three-year warranty. Green estimates its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 2 % will be repaired during the first year of warranty, 4% will be repaired during the second year of warranty and 6% will be repaired in the third year. In 2020 and 2021, the company was able to sell 7,500 units and 8,400 units, respectively at a selling price of P 5,000 per unit. The company also incurred actual repair costs of P530,000 and P 1,176,000 in 2020 and 2021, respectively. What amount should Green report as warranty expense in 2020? A.P 3,970,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Green Company started business in 2020. It sells printers with a three-year warranty. Green estimates its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 2 % will be repaired during the first year of warranty, 4% will be repaired during the second year of warranty and 6% will be repaired in the third year.
In 2020 and 2021, the company was able to sell 7,500 units and 8,400 units, respectively at a selling price of P 5,000 per unit. The company also incurred actual repair costs of P530,000 and P 1,176,000 in 2020 and 2021, respectively.
What amount should Green report as warranty expense in 2020?
A.P 3,970,000
B.P 4,500,000
C.P 5,040,000
D.P 7,834,000
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