Cléroux Corporation sold 150 colour laser copiers in 2017 for $4,000 each, including a one-year warranty. Maintenance on each machine during the warranty period averages $300.
Instructions
(a) Prepare entries to record the machine sales and the related warranty costs under the expense approach. Actual warranty costs incurred in 2017 were $17,000.
(b) Based on the information above and assuming that the cash basis is used, prepare the appropriate entries.
(c) Is the method in part (b) ever acceptable under GAAP? Explain.
(d) Are assurance-type warranties recorded differently in IFRS and ASPE?