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Calculate amount of warranty liability that must be reported

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Reference no: EM132737334

Sum-sang is a company that produces high-tech mobile phones in Jakarta. The company has a policy to provide a one-year warranty for its products. The company estimates there is a warranty claim of 5% of total sales in each period based on historical claims.

  • During the 2015 period, the company sold 1,000 units of Sum-sang at a value of IDR 10,000,000. Actual claim in 2015 amounted to IDR 100,000,000. Warranty liability as of January 1, 2015 is IDR 200,000,000. The warranty provided by the entity is special that cannot be separated from the purchase and the customer does not have the option to buy it separately.

Instructions:

Problem a. Determine the accounting treatment for the warranty, if:
i. The warranty is inseparable and cannot be purchased separately;
ii. This warranty is an additional service and customers can buy separately!

Problem b. journal for Sum-sang in the period 2015.

Problem c. Calculate the amount of warranty liability that must be reported in the 2015 Financial Position Report.

Reference no: EM132737334

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