MG automobiles LLC issue warranties at the time of sale to purchasers of its vehicles. Under the terms of the sale contract the company undertakes to make good any manufacturing defects that become apparent within three years from the date of sale. In the period it has sold 1,000,000 worth of vehicles were sold by the company in the year 2020 and as per the past experience there is an estimated 5% defects in its vehicle sold. Considering the above situation identify the correct statement from the following. MG automobiles LLC need to create a contingent liability MG automobiles LLC need to create a provision MG automobiles LLC need to create a contingent Asset MG automobiles LLC need to not do any adjustment

MG automobiles LLC issue warranties at the time of sale to purchasers of its vehicles. Under the terms of the sale contract the company undertakes to make good any manufacturing defects that become apparent within three years from the date of sale. In the period it has sold 1,000,000 worth of vehicles were sold by the company in the year 2020 and as per the past experience there is an estimated 5% defects in its vehicle sold. Considering the above situation identify the correct statement from the following. MG automobiles LLC need to create a contingent liability MG automobiles LLC need to create a provision MG automobiles LLC need to create a contingent Asset MG automobiles LLC need to not do any adjustment

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter8: Current And Contingent Liabilities

Section: Chapter Questions

Problem 31CE

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