The manufacturer of automatic gear scooters gives a warranty of three years on every scooter for the
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The manufacturer of automatic gear scooters gives a warranty of three years on every scooter for the repair or replacement of the scooters that fail to perform as per the specifi cation. The past experience reveals that on an average 7% of the scooters require repair costing ₹4,000 each and another 3% require replacement costing ₹7,000 each. During the year 2009–10, the company sold 26,000 scooters. Show how provision is to be recognized in the annual accounts.
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