Which of the following liabilities requires the use of an estimate when it is initially recorded?
A)Wages Payable
B)Unearned Revenue
C)Warranty Provision
D)Accounts Payable

Question

Quizplus · Accepted Answer

The Warranty Provision requires estimation as it is recognized at the time of sale of a product or service and represents the company's obligation to provide repairs or replacements for a certain period of time. The amount of provision depends on historical data, experience, and other relevant factors, which involves estimation. The other options (A, B, and D) do not require estimation as the amount payable or receivable is known and can be verified through supporting documents.

Which of the Following Liabilities Requires the Use of an Estimate