Question

PLEASE HELP. Read information very carefully!!!!!

General Motors Company (GM) disclosed estimated product warranty payable for comparan years as follows: (in millions) Current Year Prior Year Current estimated product warranty payable $3,068 $2,886 Noncurrent estimated product warranty payable 4,350 4,145 Total $7,418 $7,031 Assume that GM's sales were $135,506 million in the current year and that the total paid on warranty claims during the current year was $3,200 million. Required: a. Why are short and long-term estimated warranty liabilities separately disclosed? b. Provide the journal entry for the current year product warranty expense. c. What iwo conditions must be mer in order for a product warranty liability to be reported in the financial statements? a. Why are short and long-term estimated warranty liabilities separately disclosed? The distinction between short-and long-term liabilities is important to creditors in order to accurately evaluate the near-term cash the business relative to the quick current assets and other longer-term b. Select the journal entry for the current year product warranty expense, Entry 1 Product Warranty Expense Product Warranty Payable 358,700,000 358,700,000 Entry 2 Product Warranty Expense Product Warranty Payable 3,587,000,000 3,587,000,000

Yes it's sufficient information...I need help on it.

Answer 1

a. The distinction between short and long term liabilities is important to creditors in order to accurate evaluate the near term cash demands on the business relative to the quick current assets and other long term demands.

b. Entry 2

c. Two conditions are:

1. It is probable that customers will be making claim during the warranty period i,e its is probable that liability will occur.

2. The amount of expenditure to be recognized for such warranty claims can be estimated reliably.