Problem 1-7

Hill Company sells washing machines that carry a three-year warranty against manufacturer's defects. Based on the entity's experience, warranty costs are estimated at P300 per machine. During the current year, the entity sold 2,400 washing machines and paid warranty costs of P170,000. What amount should be reported as warranty expense for the current year?

Problem 1-8

On April 1, 2017, Ash Company began offering a new product for sale under a one-year warranty. Of the 50,000 units in inventory on April 1, 2017, 30,000 had been sold by June 30, 2017. Based on its experience with similar products, the entity estimated that the average warranty cost per unit sold would be P80. Actual warranty costs incurred from April 1 through June 30, 2017 amounted to P700,000. On June 30, 2017, what is the estimated warranty liability?