Warranty expense should be recorded in the period: that the product is repaired or replaced. O the product is used. O the product is paid for. the product is sold
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- The expense for warranty costs is recorded in the period ________. A. when cash is paid to repair or replace the product B. when the product is sold C. when the product is repaired or replaced D. when cash is collected from the sale of the productWhich of the following statements are true? а. Revenue should be generally recognized when the company satisfies the performance obligation. O b. Revenue should be generally recognized when cash is received. С. Revenue should be generally recognized when production is completed. O d. Revenue should be generally recognized when the warranty expires.2. Which of the following best describes the accounting for assurance-type warranty costs? * 1 point a. Expensed when paid. b. Expensed when warranty claims are certain. c. Expensed based on estimate in year of sale. d. Expensed when incurred.
- S1: In accordance with the accrual assumption, the full amount of the premium is recognized immediately as income when received; instead, the premium is normally regarded as being earned evenly over the period of the policy. S2: ABC a manufacturer of appliances, approved to insure a customer for any loss or damage that the customer may incur from the use of a purchased appliance which is covered under PFRS 17.53: Under insurance contract, the party that has a right to compensation if the insured event occurs is referred to as the insurer. O Only S3 is incorrect O Only S3 is correct All statements are incorrect Only S1 is incorrect Only S1 is correct Only S2 is incorrect O Only S2 is correct All statements are correctS1: In accordance with the accrual assumption, the full amount of the premium is recognized immediately as income when received; instead, the premium is normally regarded as being earned evenly over the period of the policy. S2: ABC a manufacturer of appliances, approved to insure a customer for any loss or damage that the customer may incur from the use of a purchased appliance which is covered under PFRS 17. S3: Under insurance contract, the party that has a right to compensation if the insured event occurs is referred to as the insurer. All statements are incorrect Only S3 is correct Only S3 is incorrect Only S2 is incorrect Only S2 is correct All statements are correct Only S1 is incorrect Only S1 is correctAll of the following statements related to recording warranty expense are true except: Multiple Choice Warranty expense should be recorded in the period when the warranty service is performed. Warranty costs are probable and the amount can be estimated. The seller reports a warranty obligation as a liability. Estimated warranty expense is recorded when revenue from the sale of the product or service is reported. Recording estimated warranty expense requires a debit to Warranty Expense.
- S1: In accordance with the accrual assumption, the full amount of the premium is recognized immediately as income when received; instead, the premium is normally regarded as being earned evenly over the period of the policy. S2: ABC a manufacturer of appliances, approved to insure a customer for any loss or damage that the customer may incur from the use of a purchased appliance which is covered under PFRS 17. S3: Under insurance contract, the party that has a right to compensation if the insured event occurs is referred to as the insurer. a. Only S3 is incorrectb. All statements are correctc. Only S2 is correctd. Only S3 is correcte. Only S1 is incorrectf. Only S2 is incorrectg. All statements are incorrect h. Only S1 is correctWhy must a company that gives a guaranty or warranty with its product or service show an expense in the year of sale rather than in a later year when a repair or replacement is made?Which of the following is an account used in applying the Sales Warranty Approach, but not the Expense Warranty Approach? Select one: O a Estimated liability under warranties Ob. Warranty Expense Oc Unearned Warranty Revenue O d. Prepaid Warranty Expense
- 15. The expense warranty accrual method a. violates the matching conceptb. requires recognition in the period of sale of the estimated warranty expense and warrantyliabilityc. separates accounting for two components of the sales price: the price of the product andthe price of the warrantyd. debits warranty costs to expense in the period when warranty expenditures are madeRequired: 1. Prepare journal entries in connection with the warranty using the “expense as incurred” approach.2. Prepare journal entries in connection with the warranty using the “accrual” approach.An encumbrance represents the estimated future liabilities for goods or services resulting from placing a purchase order or signing a contract. a. True b. False
