ABC Ltd sells washing machines with a one-year warranty. On 30 June 2021, ABC Ltd...
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ABC Ltd sells washing machines with a one-year warranty. On 30 June 2021, ABC Ltd made the following estimation: If minor defects are detected in all products that are in the warranty period, repair costs of $120,000 would result. If major defects are detected in all products that are in the warranty period, repair costs of $550,000 would result. Based on past experience and future expectations, ABC Ltd estimates that 75% of the washing machines will have no defect, 20% will have minor defect and 5% will have major defect.
What is the amount of provision for warranty to be recognised on 30 June 2021?
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