Under the contract base approach,when management estimates the extent of expected returns as a form of variable consideration,the company must establish a(n):
A)Warranty expense account
B)Returns and allowances account
C)Refund liability account
D)Warranty liability account

Question

Quizplus · Accepted Answer

When management estimates the extent of expected returns as a form of variable consideration, the company must establish a refund liability account. This account is used to record the estimated amount of refunds that the company may have to issue to customers due to returns, allowances, or other factors. This liability is recognized at the time of sale and is adjusted in future periods as refunds are issued or expected to be issued.

Under the Contract Base Approach,when Management Estimates the Extent of Expected