In Which of the Following Periods Should the Estimated Warranty

question 50

Multiple Choice

In which of the following periods should the estimated warranty liability be debited?

• A) The period when cash is paid to repair or replace the product
• B) The period when the product is sold
• C) The period when cash is collected for the sale of the product
• D) The period when the product is shipped to the customer

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Definitions:

Straight-Line Method

A method of calculating depreciation or amortization by evenly spreading the cost of an asset over its useful life.

Scrap Value

The estimated resale value of an asset at the end of its useful life, also known as salvage value.

Units-Of-Production Method

An approach to depreciation that allocates the cost of an asset over its useful life based on its output or usage, rather than the passage of time.

Scrap Value

The estimated resale value of an asset after its useful life is over and it can no longer be used as intended.