A firm is required to estimate a liability for repairs for products sold with a warranty.If the firm's accountants later find that the estimated amount for repairs has been overstated,the correct accounting procedure is to
A)make an adjusting entry to reduce the amount of estimate.
B)make a correcting entry because the overstatement is an error.
C)show the amount of overstatement on the income statement as a loss.
D)do nothing for the year in question and modify the next year's estimate.

Question

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The Answer of A firm is required to estimate a liability for repairs for products sold with a warranty.If the firm's accountants later find that the estimated amount for repairs has been overstated,the correct accounting procedure is to
A)make an adjusting entry to reduce the amount of estimate.
B)make a correcting entry because the overstatement is an error.
C)show the amount of overstatement on the income statement as a loss.
D)do nothing for the year in question and modify the next year's estimate.

A Firm Is Required to Estimate a Liability for Repairs