Volt Electronics sells equipment that includes a three-year warranty.Repairs under the warranty are performed by an independent service company under a contract with Volt.Based on prior experience,warranty costs are estimated to be $25 per item sold.Volt should recognize these warranty costs:

Question

Quizplus · Accepted Answer

Warranty costs should be recognized when the equipment is sold, based on the matching principle. This ensures that expenses are matched with the revenues they helped generate.

Volt Electronics Sells Equipment That Includes a Three-Year Warranty