If a company offers a three-year product warranty, only the portion of the warranty that is expected to be incurred in the upcoming period is accounted for in the year of product sale.

Question

Quizplus · Accepted Answer

A company must account for the entire estimated cost of the warranty at the time of the product sale, recognizing it as a liability and expense, even if the costs will be incurred in future periods.

If a Company Offers a Three-Year Product Warranty, Only the Portion