PROBLEM 3-4

Problem 3-4 (LAA) Sony Company sells stereos under a 2-year warranty contract that requires the entity to replace defective parts and provide free labor on all repairs. During 2019, 1,000 units were sold at P9,000 each. In 2020, the entity sold an additional 900 units at P9,250 each. Sales occurred on the last day of the year for both 2019 and 2020. Based on past experience, the estimated 2-year warranty costs are P200 for parts and P250 for labor per unit. It is also estimated that 40% of the warranty expenditures will occur in the first year and 60% in the second year. were: Actual warranty expenditures 2021 2020 180,000 280,000 190,000 Stereos sold in 2019 Stereos sold in 2020 Required: 1. Prepare journal entries for 2019, 2020 and 2021. 2. Analyze the estimated warranty liability account to prove the reasonable accuracy of the balance on December 31, 2021. 3. Prepare the adjustment of the estimated warranty liability on December 31, 2021