When an entity's management resolves that the entity will offer to repair a defect it has recently discovered in one of its products, even though the nature of the defect is such that purchasers of the product would not expect the entity to do so: it must immediately recognise a liability. it must immediately recognise a liability, if it can be measured reliably. it will never recognise a liability as the offer to repair was not part of the contract of sale. it will only need to recognise a liability when the entity makes the offer public, or commits itself in some other way to make the repairs.

Answered: When an entity's management resolves…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter4: Balance Sheet: Presenting And Analyzing Resources And Financing

Section: Chapter Questions

Problem 9Q

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When an entity's management resolves that the entity will offer to repair a defect it has recently discovered in one of its products, even though the nature of the defect is such that purchasers of the product would not expect the entity to do so:

		it must immediately recognise a liability.
		it must immediately recognise a liability, if it can be measured reliably.
		it will never recognise a liability as the offer to repair was not part of the contract of sale.
		it will only need to recognise a liability when the entity makes the offer public, or commits itself in some other way to make the repairs.

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