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Cabug-Os, Lovely A. (Assignment 7)

The document discusses a company that began selling a new product line in 2020 with a two-year warranty. It provides sales figures and estimated warranty costs as a percentage of sales for 2020 and 2021. It asks questions about calculating warranty expenses for 2020 and 2021, and warranty liabilities as of December 31, 2020 and December 31, 2021 based on the sales and cost data.

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Joylyn Combong
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21 views

Cabug-Os, Lovely A. (Assignment 7)

The document discusses a company that began selling a new product line in 2020 with a two-year warranty. It provides sales figures and estimated warranty costs as a percentage of sales for 2020 and 2021. It asks questions about calculating warranty expenses for 2020 and 2021, and warranty liabilities as of December 31, 2020 and December 31, 2021 based on the sales and cost data.

Uploaded by

Joylyn Combong
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Lovely A.

Cabug-os BSA-2A
Assignment # 7
In 2020, the Dubious Company began selling new line of products that car
a two-year warranty against defects.

Based upon past experience with other products, the entity estimated warr
costs as a percentage of peso sales.

First year of warranty


Second year of warranty

Sales
Actual warranty costs

1 What is the warranty expense for 2020?

a. 350,000
b. 100,000
c. 175,000
d. 150,000

2 What is the warranty liability on December 31, 2020?

a. 150,000
b. 250,000
c. 125,000
d. 0

3 What is the warranty expense for 2021?

a. 300,000
b. 350,000
c. 490,000
d. 140,000

4 What is the warranty liability on December 31, 2021?

a. 390,000
b. 440,000
c. 490,000
d. 840,000
selling new line of products that carry

products, the entity estimated warranty

2%
5%
2020 2021
5,000,000 7,000,000
100,000 300,000

Solution:
5,000,000.00
x 7%
350,000.00

mber 31, 2020?


Solution:
350,000.00
Less 100,000.00
250,000.00

Solution:
7,000,000.00
x 7%
490,000.00

mber 31, 2021?


Solution:
490,000.00
Less 300,000.00
190,000.00
Add 250,000.00
440,000.00

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