During the first year of operations, a company granted warranties on its products at an estimated cost of $8,500. The product warranty expense should be recorded in the years of the expenditures to repair the products covered by the warranty payments.

Question

Quizplus · Accepted Answer

The product warranty expense should be recorded in the same period the revenue from the sale of the warranted products is recognized, not in the years when the expenditures for repairs occur, according to the matching principle in accounting.

During the First Year of Operations, a Company Granted Warranties