Top Posters
Since Sunday
14
6
m
5
M
5
n
5
b
5
j
4
o
4
c
4
b
4
u
4
b
4
Home Q & A Board Other Fields Homework Help Business Accounting
New Topic  
H3Ko H3Ko
wrote...
Go to Answer
Posts: 4891
Rep: 45 0
7 years ago
You have started working for a company that manufactures lawn mowers.  These mowers carry a warranty that will replace defective parts for one year.  The corporate president feels that an expense should be recorded when the defective parts are replaced.  Explain the proper accounting treatment to the corporate president.
Textbook 
Horngren's Financial & Managerial Accounting, The Financial Chapters

Horngren's Financial & Managerial Accounting, The Financial Chapters


Edition: 5th
Authors:
Read 138 times
3 Replies
Replies
Answer verified by a subject expert
Mrgo-breedMrgo-breed
wrote...
#1
Top Poster
Posts: 2227
Rep: 276 0
7 years ago
Sign in or Sign up in seconds to unlock everything for free
More solutions for this book are available here
The matching principle requires businesses to record warranty expense in the same period the company records the revenue from the sales of the lawn mowers. This means that the expense is incurred when the sale is made, not when the company makes the warranty repairs. Because the exact amount of the warranty expense is not known at the time of the sale, the company must estimate the amount of expense. At the end of the accounting period, an adjusting entry is made to debit Warranty Expense and credit Estimated Warranty Payable.  Estimated Warranty Payable is a liability account that appears on the balance sheet. When defective parts are replaced, the company will debit Estimated Warranty Payable and credit Merchandise Inventory.
This verified answer contains over 120 words.
1

Related Topics

H3Ko Author
wrote...
#2
7 years ago
Really appreciate your help. Sorry for taking so long to thank you, you deserve the recognition.
wrote...
#3
7 years ago
I'm liking this Slight Smile
New Topic      
Quick Reply
Explore
Post your homework questions and get free online help from our incredible volunteers
  682 People Browsing
 190 Signed Up Today
Start New Topic Take the Tour CoursesNew Study Tools Topics Trending Browse by Textbook
Live Chat
Related Images
  
 1171
  
 39
  
 41
Your Opinion
Who's your favorite biologist?
Votes: 439
Previous poll results: Do you trust social media networks with protecting your privacy?