The Matching Principle Requires Businesses to Report Warranty Expense ________

question 59

Multiple Choice

The matching principle requires businesses to report Warranty Expense ________.

• A) in the same period that the company records the revenue related to that warranty
• B) in the period prior to which the company records the revenue related to that warranty
• C) in the period after the related revenue is recorded
• D) in the long-term assets section of the balance sheet

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Definitions:

Financial Break-Even

The point at which total revenues equal total costs and expenses, resulting in neither profit nor loss.

Salvage Value

The estimated residual value of an asset at the end of its useful life.

Cash Break-Even

The point at which a business's cash inflows equal its cash outflows, excluding financing or investment income.

Straight-Line Depreciation

An operation for dividing up the expense of a tangible asset throughout its active life in uniform annual totals.