Question

An entity started business in 2021. It sells printers with a three-year warranty. The entity estimated its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 3% will be repaired during the year of warranty, 5% will be repaired during the second year of warranty, and 10% will be repaired in the third year. In 2021 and 2022, the entity was able to sell 7,500 and 10,000 units, respectively, at a selling price of P4,000 per unit. The entity also incurred repair costs of P800,000 and P2,400,000 in 2021 and 2022, respectively. Sales and repairs occur evenly throughout the period. What is the unadjusted warranty expense for 2022? What is the unadjusted warranty liability for December 31, 2022? What is the adjusted warranty liability after testing its adequacy? What is the adjusted warranty expense for 2022?

          An entity started business in 2021. It sells printers with a three-year warranty. The entity estimated its warranty cost as a percentage of peso sales. Based on past experience, it is estimated that 3% will be repaired during the year of warranty, 5% will be repaired during the second year of warranty, and 10% will be repaired in the third year. In 2021 and 2022, the entity was able to sell 7,500 and 10,000 units, respectively, at a selling price of P4,000 per unit. The entity also incurred repair costs of P800,000 and P2,400,000 in 2021 and 2022, respectively. Sales and repairs occur evenly throughout the period.

What is the unadjusted warranty expense for 2022?
What is the unadjusted warranty liability for December 31, 2022?
What is the adjusted warranty liability after testing its adequacy?
What is the adjusted warranty expense for 2022?

Added by Austin G.

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