Intermediate Accounting

3. Impel Down, Inc. is preparing the annual financial statements on December 31, 2020. Because of a recently proven health hazard in one of its products, the Philippine goverment has clearly indicated its intention of requiring the entity to recall all cans of this product sold in the last three months. The management of the entity estimated that this recall would cost P 490,000. What accounting recognition should be accorded to this situation? a. No recognition b. Disclosure only in the notes C. Expense of 580,000 and liability of 580,000 d. Expense of 580,000 and retained eamings restriction of 580,000 4. Sabaody Co. sells televisions with a 2-year warranty. Past experience indicates that 2% of the units sold will be returned during the warranty period for repairs. The average cost of repairs under warranty is estimated to be P100 per unit. During 2019, 6,000 units were sold at an average price of P 4,000. During the year, repairs were made on 35 units at a cost of P20,000. Compute the amount of warranty expense. a 12,000 c. 18,000 b. 14,000 d. 20.000