Concerning accounting for warranties, which of the following statements is false?
A) The expense warranty accrual method is not an acceptable method for federal income tax purposes.
B) The modified cash basis is the most conceptually sound method for financial reporting.
C) The sales warranty accrual method recognizes warranty expense in the period of sale.
D) The modified cash basis recognizes warranty expense when cash is paid for the repairs to merchandise under warranty.

Question

Quizplus · Accepted Answer

The modified cash basis is not considered the most conceptually sound method for financial reporting. The most conceptually sound method is the accrual basis method, which recognizes revenue and expenses when earned/incurred, regardless of when cash is received or paid. The other statements are true: A) The expense warranty accrual method is not an acceptable method for federal income tax purposes. C) The sales warranty accrual method recognizes warranty expense in the period of sale. D) The modified cash basis recognizes warranty expense when cash is paid for the repairs to merchandise under warranty.

Concerning Accounting for Warranties, Which of the Following Statements Is