Canadian Tire provides warranties on products it sells and allows customers to return goods after purchase. Examine Notes 3 and 22 regarding provisions for warranties and returns and answer the following questions:
a. What is a warranty and why does Canadian Tire provide them for goods it sells? Why does Canadian Tire allow customers to return merchandise?
b. When are costs associated with providing warranty service recorded? Why are they recorded at this time?
c. How does Canadian Tire estimate its warranty costs and returns? Why are estimates necessary?
d. What amount does Canadian Tire report as a provision for warranties and returns on December 31, 2011? What portion of this amount is non-current? Why has the amount changed from the beginning of the year to the end of the year?
e. What adjusting journal entry does Canadian Tire record at end of a period to record the provision for warranties and returns?

  • CreatedFebruary 26, 2015
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