On 31 December 2013, NarveyHorman sold television equipment to a customer for $10 000. The customer paid cash for the television. NarveyHorman includes a three year warranty service with the sale of all its televisions.
Required
(a) Explain the obligations of the sale arising for NarveyHorman.
(b) NarveyHorman records this transaction by increasing revenue by $10 000 and increasing cash at bank by $10 000. With due consideration to the Framework, examine the appropriateness of recording the transaction and recognising the revenue in this manner. Justify an alternative way of recording the transaction.