Question

All of the following statements related to recording warranty expense are true except: Multiple Choice Recording estimated warranty expense requires a debit to Warranty Expense. Warranty expense should be recorded in the period when the warranty service is performed. Estimated warranty expense is recorded when revenue from the sale of the product or service is reported. The seller reports a warranty obligation as a liability. Warranty costs are probable and the amount can be estimated.

Answer 1

Answer:

Warranty expense should be recorded in the period when the warranty service is performed.

Explanation:

When the product is sold, a product guarantee liability and warranty cost should be reported if it is possible that consumers may make claims under the warranty and the amount can be calculated.

Those two provisions are part of the Financial Accounting Standards Statement No. 5 of the FASB, Accounting for Contingencies.