Unformatted text preview: a. Income taxes payable b. Bonus agreements D. Estimated Liabilities 1. Guarantee and Warranty Costs: The amount of the liability is an estimate of all the costs that will be incurred after sale and delivery. a. Cash basis method b. Accrual methods: (1) Expense warranty treatment . This method should be used whenever the warranty is an integral and inseparable part of the product sale and requires warranty costs to be charged to operating expense in the year of sale. (2) Sales warranty treatment . This method should be used when the warranty is sold separately from the product and requires that revenues from the sale of the warranty be deferred and subsequently recognised as income over the life of the warranty contract. 2. Premiums, coupons, loyalty programs, and other bonuses offered to customers: result in the likely existence of a liability at the date of the financial statements....
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- Spring '10
- Taxes, warranty costs, expense warranty treatment, Sales warranty treatment