CHAPTER 3: Warranty Liability

Question 1

The accrual approach in accounting for warranty

Answer 1

Represents accepted practice and should be used whenever the warranty is an integral and
inseparable part of the sale.

Question 2

Which of the following best describes the accrual approach of accounting for warranty cost?

Answer 2

Expensed based on estimate in year of sale

Question 3

Which of the following best describes the expense as incurred approach of accounting for
warranty cost?

Answer 3

Expensed when incurred

Question 4

What is the classification of the estimated warranty liability in a three-year warranty?

Answer 4

Partly current and partly noncurrent

Question 5

Which of the following is a characteristic of the accrual of warranty but not the sale of
warranty?

Answer 5

Warranty liability