A company is required to estimate a liability for repairs for products sold with a warranty. In the year following the sale, the firm's accountants find that the estimated amount for repairs has been overstated. The correct accounting procedure in the year following the sale is to

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The correct accounting procedure in this case is to make an adjusting entry to reduce the estimated liability for repairs. This adjustment reflects the correction of an error made in the previous year and ensures that the financial statements for the current year are accurate. Option B is incorrect because a correcting entry is used to fix errors that occurred in the current period, not to adjust estimates or assumptions made in previous periods. Option C is incorrect because the overstatement is not a loss, but rather an adjustment to estimated liabilities. Option D is also incorrect because even though the misstatement related to the prior year, it still requires an adjustment in the current year to accurately report the financial position and performance of the company.

A Company Is Required to Estimate a Liability for Repairs