Statement I. If the pattern of the repairs cannot be established and the obligation for warranty cannot be reasonably estimated, warranty costs are recorded as expense when repairs are actually made, thus there is no accrual of liability. Statement II. The transaction price for the sale of the product with warranty is allocated between the stand-alone selling prices of the product and warranty. A. Both statements are true. B. Both statements are false. C. Statement I is true; Statement II is false. D. Statement I is false; Statement II is true.
Statement I. If the pattern of the repairs cannot be established and the obligation for warranty cannot be reasonably estimated, warranty costs are recorded as expense when repairs are actually made, thus there is no accrual of liability. Statement II. The transaction price for the sale of the product with warranty is allocated between the stand-alone selling prices of the product and warranty. A. Both statements are true. B. Both statements are false. C. Statement I is true; Statement II is false. D. Statement I is false; Statement II is true.
Chapter12: Current Liabilities
Section: Chapter Questions
Problem 10MC: What accounts are used to record a contingent warranty liability that is probable and estimable but...
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Statement I. If the pattern of the repairs cannot be established and the obligation for warranty cannot be reasonably estimated, warranty costs are recorded as expense when repairs are actually made, thus there is no accrual of liability.
Statement II. The transaction price for the sale of the product with warranty is allocated between the stand-alone selling prices of the product and warranty.
A. Both statements are true.
B. Both statements are false.
C. Statement I is true; Statement II is false.
D. Statement I is false; Statement II is true.
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