Solution-What amount of warranty expense should be reported

What amount of warranty expense should be reported

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Reference no: EM133068762

Question - During 2018, Horse Company introduced a new line of product that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 3% in the year after sale, and 4% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows:

Sales	Actual Warranty	Expenditures
2018	P400,000	P6,000
2019	1,000,000	40,000
2020	1,400,000	90,000
Total	P2,800,000	P136,000

Required -

1. What amount should Horse report as estimated warranty liability at December 31, 2020?

2. What amount of warranty expense should be reported for 2019?

Reference no: EM133068762

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What amount of warranty expense should be reported

Reference no: EM133068762

Reference no: EM133068762

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