Mystery Company, an accrual basis retailer with a 12/31 year-end, provided the following information to you regarding the company’s warranty accounting for January 2020. Mystery offers its customers a 90-day warranty covering manufacturer defects. During January 2020 Mystery paid $2,800 to repair actual customer warranty claims; additionally, Mystery estimated $1,025 as the value for all future warranty claims resulting from the units of inventory sold during January 2020.
True or False: As part of the warranty accounting, Mystery will expense $2,800 during the month of January.
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Mystery Company, an accrual basis retailer with a 12/31 year-end, provided the following information to you regarding the company’s warranty accounting for January 2020.