What amount should be reported as warranty expense

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Question - In 2020, Brave Company started selling a new calculator that carried a 2-year warranty against defects. Brave Company projected the estimated warranty costs as a percentage of sales as follows:

First year of warranty 4%

Second year of warranty 10%

Sales and actual warranty repairs for 2021 and 2020 are as follows:

 

2020

2021

Sales

P5,000,000

P9,000,000

Actual warranty repairs

200,000

560,000

To ascertain if actual repairs approximate the estimate, an analysis of the estimated warranty liability account was conducted on December 31, 2021 and it was determined that the estimated warranty liability should have a balance of P1,300,000.

Required - What amount should be reported as warranty expense as of December 31, 2021?

Reference no: EM133129580

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