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Problem 1: An entity prepares quarterly interim financial reports in accordance with PAS 34. The entity sells goods which are subject to warranty. The company made a provision for warranty in the first quarter of the year 2019 at 5% of sales, as the company in the past experienced a 5% claim on warranty based on sales. However, in the second quarter, a modification in the design of the product resulted to a design fault and the company expected the warranty claims to increase to 10% for the whole year 2019. Sales in the first and second quarters were P10,000,000 and P15,000,000, respectively. What would be the provision charges in the second quarter's interim financial statements?
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