Toyoka Motors manufactures and sells a model of luxury sports cars which carries a two-year...
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Toyoka Motors manufactures and sells a model of luxury sports cars which carries a two-year warranty that the luxury sports cars will function as intended. In addition, customers have an option to extend this warranty for another three years by availing of the company's extended warranty program.
On January 1, 2023, Toyoka Motors sold cars for P5,000,000. The car's estimated standalone selling price is P5,000,000, and the extra three years of warranty which customers availed of is P300,000. Warranty cost for the first two years related to peso sales of cars are 3% of sales in the year of sale and 5% in the year after the
sale.
Based on past experience with regards to the extended warranty program, 20% of repairs are done in the first year of the extended warranty program, 30% on the second year of the extended warranty program and 50% on the third year of the extended warranty program
Actual warranty repairs are P130,000, P220,000, P40,000 and P80,000. for the years 2023 to 2026 respectively.
13. Determine the net income in December 31, 2023
14. Determine the amount of liability as of December 31, 2024
15. Determine the amount of net income that Toyoka Motors should recognize in 2025
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