1) Electronics4U manufactures high—end whole home electronic systems

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1) 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 P1500000 on current and prior year sales, what amount of liability would the company report on its statement of financial position at the end of the current year?

a. P2500000.

b. P3500000.

c. P9000000.

d. P10000000.

2) Tender Foot Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 40% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be P500000. What is the required journal entry as a result of this litigation?

a. Debit Litigation Expense for P500000 and credit Litigation liability for P500000.

b. Nojournal entry is required.

c. Debit Litigation Expense for P200000 and credit Litigation Liability for P200000.

d. Debit Litigation Expense for P300000 and credit Litigation Liability for P300000.