In 2019, Caramel Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows: First year of warranty 5% Second year of warranty 9% Sales and actual warranty expenditures for 2019 and 2020 are presented below: 2019 2020 Sales P3,000,000 P4,000,000 Actual warranty expenditures 100,000 250,000 Using the accrual method, what amount should Caramel report as a liability at December 31, 2020? Using the expense as incurred method, what amount should Caramel report as a liability at December 31, 2020?
In 2019, Caramel Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to peso sales are as follows:
First year of warranty 5%
Second year of warranty 9%
|
Sales and actual warranty expenditures for 2019 and 2020 are presented below: |
|
|
2019 |
2020 |
|
Sales P3,000,000 |
P4,000,000 |
|
Actual warranty expenditures 100,000 |
250,000 |
- Using the accrual method, what amount should Caramel report as a liability at December 31, 2020?
- Using the expense as incurred method, what amount should Caramel report as a liability at December 31, 2020?
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