You are auditing Patty Corporation's current liability accounts as of December 31, 2020. The following 

schedule of liabilities was presented to you by the company's accountant in relation to your audit:

Accounts payable P2,250,000

Accrued expenses 0

Audit note:

a. General Ledger - Subsidiary Ledger Reconciliation

The accountant of Patty Corporation provided you the following reconciliation of accounts

payable control account and subsidiary ledger account in connection with your audit of its

accounts payable:

Balance per control account (General ledger) P2,250,000

Purchase Invoice for goods received on January 5, 2021 (240,000)

Purchase invoice on goods still in transit as of

December 31, 2020. Term FOB destination. 300,000

Cost of goods received on December 29, 2020. Purchase

invoice documents received only on January, 2021 150,000

Payments to suppliers in which checks dated January 2, 2021

and were released on December 30, 2020 220,000

Payments to suppliers in which checks dated December 30,

2020 were released on January 2, 2020 (340,000)

Purchase returns 30,000

Debit balance on a suppliers' account 80,000

Balance per subsidiary ledgers P2,450,000

b. Cash Disbursements Cut-Off (Search for Unrecorded Liabilities)

The following is a summary of entries before and after the balance sheet date on the cash

disbursement journal of Patty Corporation:

Entry date Voucher

Reference

Description Amount Account Charged

(Debited)

Dec. 18, 2020 12 - 200 Repairs services on office

equipment in 2020 P2,900

Repairs and

maintenance expense

Dec. 26, 2020 12 - 203 Fire insurance, 12/1/2020

to 11/30/2021 24,000 Insurance Expense

Dec. 28, 2020 12 - 215 Utilities for December 2,400 Utilities expense

Jan. 3, 2021 1 - 1 Lawyers' retainer's fee for

December 4,600

Legal and professional

fees

Jan. 4, 2021 12 - 214 CPA's retainer's fee for

December 6,200

Accrued Operating

Expense

Jan. 5, 2021 1 - 2 Medical services for

employees in 2020 5,200 Medical expense

Jan. 10, 2021 1 - 3 Payroll 12/22/2020 to

1/6/2021 (12 working

days, 5 days in Jan.)

40,800 Salaries and wages

Jan. 12, 2021 1 - 4 Royalties in December 3,900 Royalty expense

Jan. 14, 2021 1 - 5 Repairs services on

factory equipment in

2021

1,900

Repairs and

maintenance

expense

Required:

1. What is the adjusted balance of the accounts payable account?

2. What is the correct accrued expenses as of December 31?

: (PROVISION: WARRANTIES)

During 2019, as a promotional program to increase sales, Quarter Company introduced a two-year

warranty program on its main product. Since 2019 was the first year the entity introduced the warranty

program, the company's estimates are based on industry experience. Best estimates indicated that the

warranty cost percentages related to peso sales are as follows:

Year of sale 7%

Year after sale 5%

Sales and actual warranty expenditures for 2019 and 2020 were as follows:

Year Sales Actual warranty costs

2019 P2,000,000 P98,000

2020 2,800,000 225,000

1. How much is the warranty expense and estimated warranty liability in 2019?

2. How much is the warranty expense and estimated warranty liability in 2020?

3. Assuming that: (a) warranty program is only for 1-year; (b) best estimates indicate that

12% of peso sales shall materialize as warranty expense; and (c) from the amount paid in

2020, P112,000 was for 2019 product warranties, what is the warranties expense in 2020

and estimated warranties liability as of December 31, 2020?

4. Assuming that: (a) warranty program is only for 1-year, and (b) best estimates indicate that

12% of peso sales shall materialize as warranty expense, what is the warranties expense in

2020 and estimated warranties liability as of December 31, 2020?