(c) What analysis issues must we consider with respect to reported warranty liabilities? ...
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c What analysis issues must we consider with respect to reported warranty liabilities? Answer Warranty liability at any given time should equal the actual dollar cost of repairs already paid for. Answer Warranty liability must always be assumed to exist and to be at least of the value of expected sales. Answer Warranty liability at any given time should equal the expected dollar cost of repairs not yet paid for. Answer The issues to consider with respect to warranty liability are whether it actually exists and what is its correct magnitude. Answer Understating accrual of warranty liability overstates current period income at the expense of future income. Answer Understating accrual of warranty liability understates current period income to the benefit of future income.
c What analysis issues must we consider with respect to reported warranty liabilities?
Answer
Warranty liability at any given time should equal the actual dollar cost of repairs already paid for.
Answer
Warranty liability must always be assumed to exist and to be at least of the value of expected sales.
Answer
Warranty liability at any given time should equal the expected dollar cost of repairs not yet paid for.
Answer
The issues to consider with respect to warranty liability are whether it actually exists and what is its correct magnitude.
Answer
Understating accrual of warranty liability overstates current period income at the expense of future income.
Answer
Understating accrual of warranty liability understates current period income to the benefit of future income.
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