Reference no: EM132934781

Questions -

Q1) Butter Marketing sells split-type air-conditioners. The company provides its customers an option to purchase a warranty contract for a two-year period for P2,250 for every unit of air-conditioner purchased priced at P45,000. If the customer chooses not to buy the warranty contract, the air-conditioner sells for P42,750. Sale of warranty contracts repairs are made evenly throughout the year. Based on past records of the entity, 30% of repairs are done in the first year from the date of sale and 70% in the second year of sale. During 2020, Butter sold 500 packages of air-conditioners and warranty contracts. The cost of servicing units during 2020 amounted to 95,000.

Based on the given data, Butter Marketing should report on December 31, 2020, how much is Profit from Warranty Contracts and Unearned Revenue from Warranty Contracts, respectively?

A. P168,750; P787,500

B. P168,750; P956,250

C. P73,750; P787,500

D. P73,750; P956,250

Q2) On January 1, Year 1, BTS Company leased a piece of machinery costing P6,000,000 with an unguaranteed residual value of P400,000. The lease term is 5 years, and the implicit interest rate is 15%. The annual lease payment of P1,730,541 is due at the end of the year starting December 31, Year 1. The machine reverts to the lessor at the end of the lease term. The lease is considered a direct finance lease. How much is the net amount of the lease receivable on December 31, Year 1?

A. P4,214,336

B. P4,269,459

C. P5,169,459

D. P6,000,000