Warranty expense on the income statement: a

Finance Nov 13, 2020

Warranty expense on the income statement: a. Is an estimate based on past experience b. Reflects actual payments to fix the product c. Is deducted from Cost of Goods Sold d. has no related balance sheet account

Expert Solution

Answer : Correct option is (a.) Is an estimate based on past experience.

Reason :

Warranty expense is similar to Bad Debt exenses which is recorded at the time of sale based on the past experience.The actual amount of warranty may be different from the expenses recorded.Therefore Warranty expense on the income statement is Is an estimate based on past experience.

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