Problem 3-4 (IAA)Sony Company sells stereos under a 2-year warranty contractthat requires the entity to replace defective parts andprovide free labor on all repairs.During 2019, 1,000 units wère sold at P9,000 each.In 2020, the entity sold an additional 900 units at P9,250each.Sales occurred on the last day of the year for both 2019 and2020.Based on past experience, the estimated 2-year warrantýcosts are P200 for parts and P250 for labor per unit.It is also estimated that 40% of the warranty expenditureswill occur in the first year and 60% in the second year.Actual warranty expenditures were:20202021280,000190,000Stereos sold in 2019180,000Stereos sold in 2020Required:1. Prepare journal entries for 2019, 2020 and 2021.2. Analyze the estimated warranty liability account to provethe reasonable accuracy of the balance on December 31,2021.3. Prepare the adjustment of the eştimated warrantyliability on December 31, 2021.

Warranty Expenses Most of the companies which are providing the warranty service to their product to…

Answered: Required: 1. Prepare journal entries…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Required: 1. Prepare journal entries for 2019, 2020 and 2021. 2. Analyze the estimated warranty liability account to prove the reasonable accuracy of the balance on December 31, 2021. 3. Prepare the adjustment of the eştimated warranty liability on December 31, 2021.