Which of the following liabilities usually requires the use of an estimate when it is first...

Which of the following liabilities usually requires the use of an estimate when it is first recorded?

Warranty obligation

Mortgage payable

Accounts payable

Unearned revenue

Expert Solution

Ans-The correct option is a-Warranty obligation.

Estimated liabilities represent known obligations that have an indefinite due date and amount. The best example is that of product warranties. When you purchase a product that has a warranty, the manufacturer or merchant incurs a liability for future claims to be made under the product warranty. Therefore, the expense associated with that warranty is recognized at the time of sale. Because the manufacturer doesn’t know specifically how many claims will be made the amount of expense associated with the warranty must be estimated, and a liability for product warranties established.

ekkarill92 answered 2 years ago

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