Sam company started business in 2020. It sells printers with a three-year warranty. Sam company 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 P5,000 unit. The company also incurred actual repair costs of P530,000 and P1,176,000 in 2020 and 2021, respectively. What amount should Sam Company report as warranty expense in 2020? What is the amount of liability for warranty reported in Sam Company’s December 31, 2021 statement of financial position? Assuming that sales and repair occur evenly throughout the period, how much would be the liability for warranty in the December 31, 2021 statement of financial position?
Sam company started business in 2020. It sells printers with a three-year warranty. Sam company 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 P5,000 unit. The company also incurred actual repair costs of P530,000 and P1,176,000 in 2020 and 2021, respectively.
What amount should Sam Company report as warranty expense in 2020?
What is the amount of liability for warranty reported in Sam Company’s December 31, 2021
Assuming that sales and repair occur evenly throughout the period, how much would be the liability for warranty in the December 31, 2021 statement of financial position?
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