West Coast Outdoor Co.sold $22,000 worth of trampolines with a one year warranty.The company estimates that 2% of the sales will result in warranty work.West Coast Outdoor Co.should:

Question

Quizplus · Accepted Answer

According to the matching principle, expenses should be recognized in the same period as the related revenue. Therefore, warranty expense should be recognized at the time of sale, as the warranty is sold with the product. Additionally, a warranty liability should be recognized at the time of sale to reflect the estimated cost of providing warranty service. Therefore, the best choice is to recognize both warranty expense and warranty liability at the time of sale, which is option D.