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Question - A new product introduces by Wilkinson Promotions carries a two-year warranty against defects. The estimated warranty costs related to peso sales are as follows:
Year of sale 3 percent
Year after sale 5 percent
Sales and actual warranty expenditures for the years ended December 31, 2001 and 2002, are as follows:
2001
Sales - P 800,000
Actual Warranty Expenditures - P 20,000
2002
Sales - P 1,000,000
Actual Warranty Expenditures - P 70,000
Requirements -
a. How much is the warranty expense in 2002?
b. How much is the estimated liability as of December 31, 2002?
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