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Emerald Motors is an automobile dealer. The controller consultswith you about the type of accounting used for a special offer toits new car customers. Emerald has offered to provide at no chargeto the customer the first four recommended service visits (i.e., at3,000, 6,000, 9,000, and 12,000 miles). It is a virtual certaintythat all customers will exercise their rights to the service, andthe cost of the services can be accurately estimated. Thecontroller reasons that the estimated cost should be accrued whenthe sale of an automobile is made so that all of the costs of thesale can be matched with the revenue. How would you respond to thecontroller?
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