$7.$ Consider the three possible accounting procedures for the costs incurred to honor warranties listed below.

Procedure #$1$

Estimate the total cost to be incurred over the warranty period and record that amount as warranty expense in the year of sale.

Procedure #$2$

Estimate the total cost to be incurred over the warranty period and amortize that amount to expense each year of the warranty

period on a straight$-$line basis.

Procedure #$3$

Record warranty expense as costs are incurred $($do not estimate and accrue$).$

Select the answer below which best describes the requirements of GAAP when recording expense related to product

warranties.

$1.$For an Assurance Warranty $2.$ For an Extended $($Service$-$Type$)$ Warranty

a$.1.$ GAAP requires Procedure #$12.$ GAAP requires Procedure #$2$

b$.1.$ GAAP requires Procedure #$12.$GAAP requires Procedure #$3$

c$.1.$ GAAP requires Procedure #$22.$GAAP requires Procedure #$2$

d$.1.$GAAP requires Procedure #$22.$GAAP requires Procedure #$3$

e$.$ None of the answers provided are correct.