1.

Product warranty:
Candelaria has one year product warranty on selected items in its product line. The estimated
warranty liability on sales made during 2009, which was outstanding as of December 31, 2009,
amounted to P416,000. The warranty costs on sales made in 2010 are estimated at P1,504,000.
Actual warranty costs incurred during 2010 are as follows:
Warranty claims honored on 2009 sales P 416,000
Warranty claims honored on 2010 sales 992,000
Total warranty claims honored P 1,408,000

a. P 0 c. P1,504,000
b. P96,000 d. P 512,000

2. Premiums:
To increase sales, Candelaria Company inaugurated a promotional campaign on June 30, 2010.
Candelaria placed a coupon redeemable for a premium in each package of product sold. Each
premium costs P100. A premium is offered to customers who send in 5 coupons and a remittance
of P30. The distribution cost per premium is P20. Candelaria estimated that only 60% of the
coupons issued will be redeemed. For the six months ended December 31, 2010, the following is
available:
Packaged of product sold 160,000
Premiums purchased 16,000
Coupons redeemed 64,000
a. P1,728,000 c. P1,152,000
b. P1,600,000 d. P 576,000
3. Due to Five Six Finance company:
Candelaria’s accounting records show that as of December 31, 2010, P1,280,000 was due to Five
Six Finance Company for advances made against P1,600,000 of trade accounts receivable assigned
to the finance company with recourse.
a. P 0 c. P1,600,000
b. P 320,000 d. P1,280,000