Nash Industries Changed Its Method of Accounting for Warranties from the Cash

question 77

Essay

Nash Industries changed its method of accounting for warranties from the cash basis to the accrual basis on January 1,2016.The company's accountant determined that a liability of $70,000 should be established.Ignore income taxes.
Required:
Prepare the journal entry to record the accounting change.

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Definitions:

Misleading Advertising

Advertising that deceives or is likely to deceive the consumers, making them believe something about a product or service that is not true.

Insider Trading

Refers to illegal practice where trade of a company's stock is undertaken by people who have access to non-public, material information about the company.

Tying Contract

A requirement imposed by a seller that a buyer purchase another (or other) of its products as a condition for buying a desired product; a practice forbidden by the Clayton Act.

Price-fixing

An illegal agreement among competitors to maintain prices at a certain level, preventing the forces of competition from dictating market prices.