Electronics4U manufactures high-end whole home electronic systems. The company provides a one-year warranty for all products sold. The company estimates that the warranty cost is P200 per unit sold and reported a liability for estimated warranty costs P6.5 million at the beginning of this year. If during the current year, the company sold 50,000 units for a total of P243 million and paid warranty claims of P7,500,000 on current and prior year sales.

1. What amount of liability would the company report on its statement of financial at the end of the current year?

a. 2,500,000.

b. 3,500,000.

c. 9,000,000.

d. 10,000,000.

Felton Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to unearned service contract revenues. This account had a balance of P480,000 at December 31, 2019 before year-end adjustment. Service contract costs are charged as incurred to the service contract expense account, which had a balance of

P120,000 at December 31, 2019. Outstanding service contracts at December 31, 2019 expire as follows:

During 2020 During 2021 During 2022

P100,000 P160,000 P70,000

1. What amount should be reported as unearned service contract revenues in Felton's December 31, 2019 statement of financial position?

a. 360,000.

b. 330,000.

c. 240,000.

d. 220,000.

Vargas Company has 35 employees who work 8-hour days and are paid hourly. On January 1, 2019, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2019 may first be taken on January 1, 2020. Information relative to these employees is as follows:

Hourly Vacation Days Earned Vacation Days Used

Year Wages by Each Employee by Each Employee

2019 P25.80 10 0

2020 P27.00 10 8

2021 P28.50 10 10

Vargas has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned.

1. What is the amount of the accrued liability for compensated absences that should be reported at December 31, 2021?

a. P94,920.

b. 90,720.

c. 79,800.

d. 95,760.

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