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Benson Company sells two products, Grey and Yellow. Each carries a 1-year warranty. 1.Product GreyProduct...

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Accounting

Benson Company sells two products, Grey and Yellow. Each carries a 1-year warranty. 1.Product GreyProduct warranty costs, based on past experience, will normally be 1% of sales. 2.Product YellowProduct warranty costs cannot be reasonably estimated because this is a new product line. However, the chief engineer believes that product warranty costs are likely to be incurred.

What would the accounting principle of conservatism dictate in this instance?

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