The cost of a product warranty should be included as an expense in the
A) period the cash is collected for a product sold on account
B) future period when the cost of repairing the product is paid
C) period of the sale of the product
D) future period when the product is repaired or replaced

Question

Quizplus · Accepted Answer

The cost of a product warranty should be included as an expense in the period of the sale of the product. This is because the cost of the warranty is incurred at the time of sale, as it is a cost associated with guaranteeing the performance and quality of the product being sold. Therefore, it should be recognized as an expense in the same period as the revenue generated from the sale.

The Cost of a Product Warranty Should Be Included as an Expense