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How much is the warranty expense to be recognized

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Question - Ola Company provides 3-year warranty for the products it sells. Ola estimates that warranty costs P400 per unit sold. As of January 1, 2021, the liability for warranty has a balance of P800,000 for units sold in 2020. During the year Ola sold 5,000 units and actual warranty costs incurred were P1,240,000.

1. How much is the warranty expense to be recognized in 2021?

a. 2,000,000

b. 1,240,000

c. 3,240,000

d. 4,240,000

2. How much is the balance of the warranty obligation as of December 31, 2021?

a. 1,560,000

b. 2,000,000

c. 3,560,000

d. 2,800,000

Reference no: EM133124277

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