Accounting for product warranty costs under an assurance-type warranty ________.
A)is required for income tax purposes
B)charges an expense account when the seller performs in compliance with the warranty
C)is frequently justified on the basis of expediency when warranty costs are immaterial
D)should be used whenever the warranty is an integral and inseparable part of the sale

Question

Quizplus · Accepted Answer

Accounting for product warranty costs under an assurance-type warranty should be used whenever the warranty is an integral and inseparable part of the sale. This is because the warranty represents an obligation of the seller that must be fulfilled and therefore should be accounted for as a separate component of the transaction.

Accounting for Product Warranty Costs Under an Assurance-Type Warranty ________