All of the following statements related to recording warranty expense are except:
A) Recording estimated warranty expense complies with the full disclosure principle.
B) Warranty expense should be recorded in the period when the warranty service is performed.
C) Recording estimated warranty expense complies with the matching principle.
D) The seller reports a warranty obligation as a liability.
E) Warranty costs are probable and the amount can be estimated.

Question

Quizplus · Accepted Answer

Warranty expense should be recorded in the period when the product is sold, not when the warranty service is performed. This is because the matching principle requires that expenses be recognized in the same period as the revenue they help generate. By recording the warranty expense in the period of the sale, the expenses related to the sale are recognized in the same period as the revenue from the sale.

All of the Following Statements Related to Recording Warranty Expense