How much should otis report as warranty expense

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Q1. Otis Company sells calculators that carry a one-year warranty against manufacturer's defects. Based on company experience, warranty costs are estimated at P300 per calculator. During 2017, Otis sold 24,000 calculators, and paid warranty costs of P170,000. In its income statement for the year ended December 31, 2017, how much should Otis report as warranty expense?

a. 1,700,000

b. 2,400,000

c. 5,500,000

d. 7,200,000

Q2. In May 2017, Maive Company filed suit against Wiley, Inc. seeking P850,000 damages for patent infringement. A court verdict in November 2017 awarded Maive P600,000 in damages, but Wiley's appeal is not expected to be decided before 2017. Maive's counsel believes it is probable but not virtually certain that Maive will be successful against Wiley for an estimated amount in the range between P300,000 and P450,000, with P400,000 considered the most likely amount. What amount should Maive record as a contingent asset from lawsuit in the year ended December 31, 2017?

a. None

b. 300,000

c. 400,000

d. 600,000

Reference no: EM133117951

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