Raya Company offers a 3-year warranty on its products. Raya estimated warranty costs to be 5% of sales. Due to a technological advance in production at the beginning of 2021, Raya now believes 3% of sales to be a better estimate of warranty costs. Warranty costs of P500,000 and P1,000,000 were reported in 2019 and 2020, respectively. Sales for 2021 amounted to P25,000,000. What amount should be shown in the 2021 financial statements as warranty expense? Group of answer choices A. 750,000 B. 1,250,000 C. 2,000,000 D. 500,000

Raya Company offers a 3-year warranty on its products. Raya estimated warranty costs to be 5% of sales. Due to a technological advance in production at the beginning of 2021, Raya now believes 3% of sales to be a better estimate of warranty costs. Warranty costs of P500,000 and P1,000,000 were reported in 2019 and 2020, respectively. Sales for 2021 amounted to P25,000,000. What amount should be shown in the 2021 financial statements as warranty expense? Group of answer choices A. 750,000 B. 1,250,000 C. 2,000,000 D. 500,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 10E

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