PROBLEM 3-15 - PROBLEM 3-16

Problem 3-15 (AICPA Adapted) Wall Company sold a product under a two-year warranty The estimated cost of warranty repairs is 2% of net sales During the first two years in business, the entity made following sales and incurred the following warranty repair costs: 2020 2021 2,500,000 3,000,000 45,000 50,000 warranty expense for Net sales Total repair costs incurred What amount should be reported as 20212 a. 60,000 b. 50,000 c. 10,000 d. 59,000 Problem 3-16 (IAA) Bass Company manufactures high-end home electronic systems. The entity provides a one-year warranty for all products sold. The entity estimated that the warranty cost is P200 per unit sold and reported a liability for estimated warranty cost of P650,000 at the beginning of the year. During the current year, the entity sold 5,000 units for a total of P9,000,000 and paid warranty claims of P750,000 on current and prior year sales. What is the warranty liability at year-end? a. 250,000 b. 350,000 c. 900,000 d. 750,000