In 2020, Eastern Appliance Manufacturing introduced a fully automatic washing machine with dryer. The sales price per unit, which comes with warranty, is P40,000. The company offers a three-year warranty against defects and provides service other than the agreed-upon specifications. In addition, the customers are given the option to purchase the warranty separately. If the customer opted not to buy the warranty, the washing machine with dryer is sold for P37,500. The following sales data are compiled for 2020 and 2021. • Washing machine with dryer sold: 2020- 800; 2021- 1,000 • Warranty contracts sold: 2020- 700; 2021- 850 Eastern Appliance Manufacturing estimates that of the total pesos spent for repairs in the warranty contracts, 20% is incurred evenly during the first warranty year, 30% evenly in the second warranty year, and 50% evenly during the third warranty year. Cost of servicing the units during 2020 and 2021 were P100,000 and P510,000, respectively. How much is the unearned revenue from warranty contracts on December 31, 2020 and December 31, 2021? A. 1,575,000 and 3,050,000 B. 1,750,000 and 2,125,000 C. 1,400,000 and 2,575,000 D. 1,750,000 and 3,050,000
In 2020, Eastern Appliance Manufacturing introduced a fully automatic washing machine with dryer. The sales price per unit, which comes with warranty, is P40,000. The company offers a three-year warranty against defects and provides service other than the agreed-upon specifications. In addition, the customers are given the option to purchase the warranty separately. If the customer opted not to buy the warranty, the washing machine with dryer is sold for P37,500.
The following sales data are compiled for 2020 and 2021.
• Washing machine with dryer sold: 2020- 800; 2021- 1,000
• Warranty contracts sold: 2020- 700; 2021- 850
Eastern Appliance Manufacturing estimates that of the total pesos spent for repairs in the warranty contracts, 20% is incurred evenly during the first warranty year, 30% evenly in the second warranty year, and 50% evenly during the third warranty year.
Cost of servicing the units during 2020 and 2021 were P100,000 and P510,000, respectively.
How much is the unearned revenue from warranty contracts on December 31, 2020 and December 31, 2021?
A. 1,575,000 and 3,050,000
B. 1,750,000 and 2,125,000
C. 1,400,000 and 2,575,000
D. 1,750,000 and 3,050,000
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
