When do the effects of product warranties appear on the statement of cash flow?
A)When there is a settlement of a warranty claim made by a customer.
B)When the warranty obligation is recognized.
C)When the sale of merchandise is made.
D)None of these.

Question

Quizplus · Accepted Answer

Cash is usually used to settle a warranty claim made by a customer, but is never used at the time the obligation is recognized as an expense. Although cash may be collected when the sale is made, that cash is not related to the warranty.

When Do the Effects of Product Warranties Appear on the Statement