Concerning accounting for warranties, which of the following statements is false?
A) The GAAP approach of accruing warranty expense and the related liability) in the year of the sale is not an acceptable method for federal income tax purposes.
B) The modified cash basis is the most conceptually sound method for financial reporting.
C) In accounting for service-type warranties, companies much report warranty expense in the period of sale.
D) The modified cash basis recognizes warranty expense when cash is paid for the repairs to merchandise under warranty.

Question

Quizplus · Accepted Answer

The modified cash basis is not the most conceptually sound method for financial reporting; the accrual basis is preferred as it matches expenses with revenues in the period they are incurred.

Concerning Accounting for Warranties, Which of the Following Statements Is