In March 2016, Emett Motors began selling extended warranties for the vehicles it sells. The extended warranties cover parts and labor for all repairs to brakes and powertrain. Emett sold $10,000 of the extended warranties in March, and estimates that it will incur $6,000 of cost over the five-year time period to fulfill them (the present value of the $6,000 is $5,000). In March 2016, Emett would record: a. A contingent liability of $6,000 b. A contingent liability of $5,000 c. Deferred revenue of $10,000 d. Both (a) and (c) are correct.
In March 2016, Emett Motors began selling extended warranties for the vehicles it sells. The extended warranties cover parts and labor for all repairs to brakes and powertrain. Emett sold $10,000 of the extended warranties in March, and estimates that it will incur $6,000 of cost over the five-year time period to fulfill them (the present value of the $6,000 is $5,000). In March 2016, Emett would record: a. A contingent liability of $6,000 b. A contingent liability of $5,000 c. Deferred revenue of $10,000 d. Both (a) and (c) are correct.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 10E
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In March 2016, Emett Motors began selling extended warranties for the vehicles it sells. The extended warranties cover parts and labor for all repairs to brakes and powertrain. Emett sold $10,000 of the extended warranties in March, and estimates that it will incur $6,000 of cost over the five-year time period to fulfill them (the present value of the $6,000 is $5,000). In March 2016, Emett would record: a. A
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