Reference no: EM132789427

With the end goal of attracting as much customers as possible in the NCR region, Abenson Appliance Company engaged in a customer satisfaction program and marketing strategy for two of their major lines of product: (1) electrical appliance and (2) household and office furniture. All branches in the region are participating in the company's promotions.

• In the customer satisfaction program, Abenson Company provides one-year warranty for replacement of parts and labor of the electrical appliance sold. Based on past experience, the estimate warranty cost is 3% of sales. During 2020, total sales of electrical appliances was P7,200,000. Replacement parts and labor for warranty work totaled P184,000 during 2020.
• In the company's marketing strategy for the household and office furniture section, customers are given a coupon for every P1,000 spent on these items. Customers may exchange 10 coupons plus P500 for a "hot and cold" water dispenser. Each water dispenser cost Abenson Company P1,200 and estimates that 40% of the coupons given to the customers will be redeemed. During 2020, sales of household and office furniture totaled P2,600,000. A total of 100 water dispensers used in the promo were purchased and there were 800 coupons redeemed in 2020.

The accrual method is used by Abenson to account for the warranty and premium costs for financial reporting purposes. The balance in the accounts related to warranties and premiums on January 1, 2020 were as follows:

Inventory of "hot and cold" water dispensers        30 units
Estimated premium claims outstanding                 17,500
Estimated liability for warranty                             80,000

Problem 1: How much is the warranty expense for the year ended December 31, 2020?