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WARRANTY COSTS

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › WARRANTY COSTS

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • September 9, 2020 at 7:52 am #584283
    storm
    Member
    • Topics: 14
    • Replies: 12
    • ☆

    Hello sir,
    i am just going through the kaplan study text and i just need clarification on warranty costs this is what was included in the trial bal
    Warranty provision 90,000
    The year end provision for warranty claims has been estimated at
    $75,000. Warranty costs are charged to administrative expenses.
    Administration ((20% × 30) + 170 – 15) this is the calculation.
    my question is why are they subtracting 15kisnt provision an exp ? by subtracting it they are treating as an income ?

    thanks in advance

    September 10, 2020 at 3:54 pm #584796
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7193
    • ☆☆☆☆☆

    Hi,

    It isn’t income, it is the reduction in the liability from 90,000 to 75,000 which corresponds to an expense.

    Thanks

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