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CH 1,warranty provision enquire.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › CH 1,warranty provision enquire.

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 21, 2021 at 4:04 am #625951
    7fsa
    Participant
    • Topics: 58
    • Replies: 41
    • ☆☆

    Dear Chris,

    How are you?
    I hope you are well and safe,

    In chapter 1 Kaplan textbook, page #9&10 its mentioned extracted trail balance for 31 march 2019 the following.
    Warranty provision $90000 in the face of trail balance and in the notes it is mentioned the year end provision for warranty clains has been estimated at $75000.warranty costs are charged to administrative expense.
    In the solution amount of $15000 has been deducted of administrative expenses.
    Could you explain why? Use journal entries if possible please for establishing warranty provision and how can we deduct from the provision.

    Thanks in advance.

    June 24, 2021 at 8:30 pm #626235
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6451
    • ☆☆☆☆☆

    Hi,

    The provision is already in the accounts from last year at $90,000 and we need to adjust it to its new value of $75,000. This is a movement of $15,000 from last year’s and a decrease in the provision.

    Now that you have the background information, have a go at the double entry and see how you get on.

    Thanks

    August 10, 2021 at 6:42 pm #631085
    7fsa
    Participant
    • Topics: 58
    • Replies: 41
    • ☆☆

    Dear Chris,

    I hope you are well and safe,
    Could you tell me where is warranty accounting is covered,please?
    I would like to do some revision around.

    Thank you in advance.

    August 19, 2021 at 9:44 pm #632259
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6451
    • ☆☆☆☆☆

    Hi,

    It is part of IAS 37 as it is a provision.

    Thanks

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