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Accrued product warranty General Motors Corporation (GM) disclosed estimated product warranty payable for comparative years as follows: Presume that GM’s sales were $135,592 million in Year 2 and that the total paid on warranty claims during Year 2 was $3,000 million. a. Why are short- and long-term estimated warranty liabilities disclosed separately? b. Provide the journal entry for the Year 2 product warranty expense. c. What two conditions must be met in order for a product warranty liability to be reported in the financial statements?

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 11, Problem 21E
Textbook Problem
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Accrued product warranty

General Motors Corporation (GM) disclosed estimated product warranty payable for comparative years as follows:

Chapter 11, Problem 21E, Accrued product warranty General Motors Corporation (GM) disclosed estimated product warranty , example  1

Presume that GM’s sales were $135,592 million in Year 2 and that the total paid on warranty claims during Year 2 was $3,000 million.

  1. a. Chapter 11, Problem 21E, Accrued product warranty General Motors Corporation (GM) disclosed estimated product warranty , example  2Why are short- and long-term estimated warranty liabilities disclosed separately?
  2. b. Provide the journal entry for the Year 2 product warranty expense.
  3. c. What two conditions must be met in order for a product warranty liability to be reported in the financial statements?

a.

To determine

State the reason to separately disclose the short and long-term estimated warranty liabilities.

Explanation of Solution

Warranty: It is an agreement made by the company to provide guarantee against the defects in the products.

State the reason why the short and long-term estimated warranty liabilities disclosed separately.

The estimated warranty liability signifies the outstanding warranty claims. In year 1, $2,884 million is estimated to be due during Year 2 and $4,147 million is expected to be paid after Year 2...

b.

To determine

Journalize Year 2 product warranty expense

c.

To determine

Write two conditions that must be met in order for a product warranty liability to be reported in the financial statements.

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Chapter 11 Solutions

Financial Accounting
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