The selling price of Maning-Mani Appliances Company's unit is Php10,000 each. The buyers are provided with a 2-year warranty that is expected to cost the company Php1,000 per unit in the year of sale and Php2,000 per unit in the year following the sale The company sold 400 units in 2021 and 250 units in 2022. Based on company estimates, 20% of the units sold are repaired in the first year and 40% in the second year. Payments for warranty repairs were Php220,000 and Php300,000 in 2021 and 2022, respectively.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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What would be the adjusting entry to be made for 2021 if the company ascertain whether actual warranty cost approximate the estimate assuming sales and warranty repairs made evenly during the year?

 

a. A debit to Warranty Expense and credit to Estimated Warranty Liability of Php192,500
b. A debit to Estimated Warranty Liability and credit to Warranty Expense of Php192,500
c. A debit to Estimated Warranty Liability and credit to Retained Earnings of Php192,500
d. No adjusting entry to be made
The selling price of Maning-Mani Appliances Company's unit is
Php10,000 each. The buyers are provided with a 2-year warranty
that is expected to cost the company Php1,000 per unit in the
year of sale and Php2,000 per unit in the year following the sale
The company sold 400 units in 2021 and 250 units in 2022.
Based on company estimates, 20% of the units sold are repaired
in the first year and 40% in the second year. Payments for warranty
repairs were Php220,000 and Php300,000 in 2021 and 2022,
respectively.
Transcribed Image Text:The selling price of Maning-Mani Appliances Company's unit is Php10,000 each. The buyers are provided with a 2-year warranty that is expected to cost the company Php1,000 per unit in the year of sale and Php2,000 per unit in the year following the sale The company sold 400 units in 2021 and 250 units in 2022. Based on company estimates, 20% of the units sold are repaired in the first year and 40% in the second year. Payments for warranty repairs were Php220,000 and Php300,000 in 2021 and 2022, respectively.
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