Reference no: EM132578240

Fillmore Company started selling a new product that carried a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to peso sales are computed as follows:

First year of warranty 3%

Second year of warranty 5%

Total sales and actual warranty repairs for 2014 and 2015 are given below:

                                                  2014                      2015

Sales                                       P 4,200,000        P 6, 960, 000

Actual warranty expenditures            148,800              180,000

REQUIRED:

Question (a) What amount should Fillmore report as its estimated warranty liability as of December 31, 2015?