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Determine the amount of warranty liability on december

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Reference no: EM132898726

Toyoka Motors manufactures and sells a model of luxury sports cars. Included in the car's price is a five-year warranty that is two years longer than warranties provided by other car manufacturers; in addition, the law only requires Toyoka Motors to provide a three-year warranty.

  • On January 1, 2021, Toyoka Motors sells a car to a customer for P2,000,000. The car's estimated standalone selling price is P1,800,000, and the extra two years of warranty is P200,000. Toyoka Motors delivers the car on January 1, 2021 and the customer pays P2,000,000 on that same date. Based on past experience, Toyoka Motors expects to incur P250,000 of warranty expense each year during the first three years of the car's life and provide repairs evenly during the 4th and 5th year of the warranty period. Actual repairs during the first, second and third years were P80,000, P120,000 and P180,000 respectively.

Question 1: Determine the amount of warranty liability on December 31, 2021

Question 2: Determine the amount of warranty liability as of December 31, 2022

Question 3: Determine the amount of revenue that Toyoka Motors should recognize in 2024

Reference no: EM132898726

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