In concept, the estimating of Warranty Expense when products are sold under warranty is similar to the estimating of Bad Debts Expense based on credit sales.

Question

Quizplus · Accepted Answer

Both warranty expense and bad debts expense require estimation based on historical experience and other relevant factors such as customer satisfaction, product quality, and economic conditions. Both expenses are recognized in the same period as the sale of the product, and both are considered as a percentage of the sales revenue.

In Concept, the Estimating of Warranty Expense When Products Are