ABC Company prepares quarterlycalendar interim financial reports.Entity sells goods and normally 8% ofcustomers claim on their warranty.Provision in the first quarter wascalculated 8% of sales to date whichamounted to P 6M.second quarter sales amounted to140% of first quarter sales.In third quarter, better data areavailable and revision of percentageis implemented which is increased byP 2.50%. Sales for the secondquarter amounted to 70% ofcombined first and second quartersales.In the fourth quarter, percentage ofwarranty is consistent with thirdquarter but total warranty expenseto be recognized for the year shouldnot exceed 9.00% of the total sales.Fourth quarter sales is 40% of thirdquarter sales.How much is the warranty expensefor the fourth quarter interimfinancial statements?

The calculation of warranty expense for the fourth quarter interim financial statements is shown…

Answered: ABC Company prepares quarterly calendar…

ABC Company prepares quarterly calendar interim financial reports. Entity sells goods and normally 8% of customers claim on their warranty.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

ABC Company prepares quarterly
calendar interim financial reports.
Entity sells goods and normally 8% of
customers claim on their warranty.
Provision in the first quarter was
calculated 8% of sales to date which
amounted to P 6M.
second quarter sales amounted to
140% of first quarter sales.
In third quarter, better data are
available and revision of percentage
is implemented which is increased by
P 2.50%. Sales for the second
quarter amounted to 70% of
combined first and second quarter
sales.
In the fourth quarter, percentage of
warranty is consistent with third
quarter but total warranty expense
to be recognized for the year should
not exceed 9.00% of the total sales.
Fourth quarter sales is 40% of third
quarter sales.
How much is the warranty expense
for the fourth quarter interim
financial statements?

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