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What is the correct warranties expense to be reported

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Question - JDI Video and Sound sells compact stereo systems with a two-year warranty. Past experience indicates that 10% of all sets sold will need repair in the first year, and 20% will need repairs in the second year. The average repair cost is P500 per system. The company was able to sell 5,000 units and 6,000 units in 2018 and 2019, respectively.

Actual repair costs were P325,000 in 2018 and P650,000 in 2019. All repair costs involved cash expenditures and were all charged to warranties expense on the year of incurrence.

No accrual for additional warranty liability were made by the company at year end.

Required -

1. Prepare adjustments in 2019.

2. What is the correct Warranties expense to be reported in 2018?

3. What is the correct Warranties expense to be reported in 2019?

4. What is the correct Estimated warranties liabilities to be reported at the end of 2018?

5. What is the correct Estimated warranties liabilities to be reported at the end of 2019?

Reference no: EM133176188

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