The expense for warranty costs is recorded in the period ________.
A) when the product is sold
B) when the product is repaired or replaced
C) when cash is paid to repair or replace the product
D) when cash is collected from the sale of the product

Question

Quizplus · Accepted Answer

The expense for warranty costs is recorded in the period when the product is sold, according to the matching principle of accounting. This principle requires expenses to be matched with the revenues they help to generate, which in the case of warranty costs, is the sale of the product.

The Expense for Warranty Costs Is Recorded in the Period