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Entity ABC Limited gives warranties at the time of sale to purchasers of its product....

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Accounting

Entity ABC Limited gives warranties at the time of sale to purchasers of its product. Under the terms of the contract for sale the entity undertakes to make good, repair or replacement, manufacturing defects that become apparent within 3 years from the date of sale. On the basis of experience, it is probable that there will be some claims under the warranties.

Discuss how ABC Limited should treat this case in their financials.

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