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Question - On January 2, 2010, Pylon Company introduced a newline of products that carry a three-year warranty against factory defects.
Estimated warranty costs related to peso sales are as follows: 1% of sales in the year of sale, 2% in the year after sales and 3% in the second year after sale.
Sales and actual warranty expenditures for the period 2010 to 2012 were as follows:
Sales Actual Warranty Expenditures
2010 P200,000 P1,500
2011 500,000 7,500
2012 700,000 22,500
P1,400,000 P31,500
What amount should Pylon report as warranty expense in 2012?
a. P52,500
b. P22,500
c. P23,000
d. P42,000
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