During the first year of operations, a company granted warranties on its products.The estimated cost of the product warranty liability at the end of the year is $8,500.The product warranty expense of $8,500 should be recorded in the years the expenditures to repair the products covered by the warranty will be paid.

Question

Quizplus · Accepted Answer

The product warranty expense should be recorded in the same year the related revenue is recognized, not in the years the repair expenditures are paid, to match expenses with revenues.

During the First Year of Operations, a Company Granted Warranties