Concerning Accounting for Warranties, Which of the Following Statements Is

question 14

Multiple Choice

Concerning accounting for warranties, which of the following statements is true?

• A) Federal income tax regulations require companies to accrue warranty expense in the year of the sale.
• B) The modified cash basis method is required for tax reporting.
• C) The modified cash basis method uses a percentage of completion approach to warranty revenue recognition.
• D) The modified cash basis recognizes warranty expense when cash is received on the sale.

---

Definitions:

Contribution Margin

The difference between a company's sales revenue and its variable costs.

Management By Exception

A management strategy where only significant deviations from planned results are addressed, focusing managerial attention on the most important issues.

Top Levels Of Management

The highest tier in an organization's management structure, typically including roles like CEO, CFO, and other senior executives responsible for strategic decisions.

Master Budget

A comprehensive financial plan that includes detailed financial statements, forecasts, and budgets, consolidating all aspects of an organization’s financial performance.