THANKS!!!!

Smile

Estimated Warranty

1st yr- 3 %

2nd yr- 5%

3rd yr- 6%

Sales

2009- 100000

2010- 200000

2011- 150000

How much is Estimated Liab, and Expense for 2009? 2010? 2011?

Assume actual repairs occured evenly throughout the year.

Warranty Liability

Ang warranty liability ay isang klase ng liability na kung saan ang warrantor (o yung nagbigay ng
warranty) ay nagga-guaranty ng serbisyo na ayusin ang anumang sira ng produktong naibenta nila
in the future, giving you “probable and measurable costs to be incurred for the rendering of a
future service”. Kaso, papano nirerecognize yung “Warranty Expense” at paano dine-derecognize
yung Liability.

Ang Warranty Expense/Warranty Liability ay nirerecognize na when the cost becomes “probable
and measureable” which is usually during the year of Sale. So sa year na nagbenta na tayo,
magkakaroon na tayo ng idea kung magkano ang magiging cost natin based on past experience
(thus, becomes measureable) at based din sa ating past experience, pag nagbebenta tayo sa
customers ng products usually may nagpapa-repair ng sira (thus, becomes probable). So recognize
the whole Expense/Liability on the year of Sale.

Pag magdederecognize ka ng Liability, eto ang entry:

(dr) Warranty Liability

(cr) Cash (for costs incurred)

Dalawa ang pwedeng paraan para i-derecognize ang Warranty Liability, pwedeng Discrete (madali
lang to, kapag actually na nabigyan ng service yung customer at gumastos ka dun ka mag-eentry,
usually sa mga Low-Volume and High Dollar Amount na mga warranties ito kaya madali imonitor)
at mayroon ding “Evenly Throughout the Period” (o naka-spread out yung pagrecognize ng
pagprovide ng service, usually sa mga High Volume, Low Dollar Amounts ginagamit to – kasi
napakahirap naman kung iisa-isahing imomonitor mo yung mga warranties kaya we’ll use
estimates in derecognizing the Warranty Liability). Minsan, upon using this method, may actual
dollar amounts ka parin na record ng cash outlay for the warranties kaya kelangan mo ng
adjustment at the end of the period (ung problem na given walang nakaspecify na actual outlay ng
cash so i-aassume natin na yung outlay ng cash ay “evenly throughout the period din”. Mamaya
bibigay ako ng example using the same problem na may “what if there’s a specific yearly cash
outlay for the warranty”.)

Let’s focus on the “Evenly Throughout the Period” method kasi ito usually ang ginagamit sa pag-
estimate ng liability. Ok, nung nag-aaral ako, nasa isip ko rin bakit nga ba laging ½ or 50% lang ng
percentage for the year ang dinederecognize na liability, bakit of all fractions or rates, bakit 50%.
Base sa masusuring pag-aaral (wehhh), the reason behid using ½ or 50% is because we’re getting
the “AVERAGE”. Kasi nga evenly throughout the period eh kaya spread out or in-AVERAGE sya.
Diba ganon ang ginagawa natin pag kumukuha tayo ng average ng grade, iniispread-out natin yung
grade evenly throughout our subjects? Ganon din sa warranties. Ina-average natin yung
derecognition ng Liability. Oki? Clear po ba? Pag may tanong dito, please post a follow-up
question.

Ok, let’s proceed with the problem. Ngayon, may techniqe sa pag atake sa mga warranty liability
probs lalo pag evenly throughout ang hinahanap. Ito ay ang BOX METHOD (natutunan ko to kay
Ma’am Patricia Empleo). Gagamit ka ng box para ma-estimate mo yung balance ng Warranty
Liability account.

https://i1.wp.com/i438.photobucket.com/albums/qq107/joseph0487/p1.jpg

Using this box, cocompute natin ang ending balance ng liability at icocompare natin sa beginning
balance para malaman natin kung magkano idederecognize natin.

Ok, i-state ulit natin yung problem

Estimated Warranty

1st yr- 3 %

2nd yr- 5%

3rd yr- 6%

Sales
2009- 100000

2010- 200000

2011- 150000

How much is Estimated Liab, and Expense for 2009? 2010? 2011?

Assume actual repairs occured evenly throughout the year

Ok, Start muna natin for 2009:

Magkano yung Warranty Expense. Since during 2009 probable at measureable na ang Warranty
Expense na maiincur mo for the next couple of years, you’ll recognize the entire expense thus:

3% for year 1 + 5% for year2 + 6% for year3 = 14% total Expense/Liability

for 2009

Warranty Liability/Expense For 2009 Sales

100,000 * 14% = P 14,000

https://i2.wp.com/i438.photobucket.com/albums/qq107/joseph0487/2009we.jpg

So, malinaw na, may Warranty Liability ka na at Expense. Ngayon, estimate mo naman kung
magkano sa P 14,000 ang nabigyan mo na ng service at magkano pa ang Liability mo at the end of
the period. Pano? Edi Estimate mo yung Ending Balance mo ng Warranty Liability mo:

Yung shaded part, yun yung future services yet to be rendered, so at the END OF 2009, yung
shaded part yung utang mo pa sa customers:

https://i2.wp.com/i438.photobucket.com/albums/qq107/joseph0487/2009box.jpg

For 2009 Sales

100,000 * 3% * ½ = 1,500

100,000 * 5% = 5,000

100,000 * 6% = 6,000

ENDING BALANCE as of 2009 = 1500 + 5000 + 6000 = 12,500

https://i2.wp.com/i438.photobucket.com/albums/qq107/joseph0487/2009ta.jpg

So, may P1,500 kang derecognition ng Warranty Liability for costs incurred for the rendering of
service to the warranty customers. Equal din to sa:

100,000 * 3% * ½ = P1,500