$($c$)$ What analysis issues must we consider with respect to reported warranty liabilities?

Answer $3$

Warranty liability at any given time should equal the actual dollar cost of repairs already paid for.

Answer $4$

Warranty liability must always be assumed to exist and to be at least $3\%$ of the value of expected sales.

Answer $5$

Warranty liability at any given time should equal the expected dollar cost of repairs not yet paid for.

Answer $6$

The issues to consider with respect to warranty liability are whether it actually exists and what is its correct magnitude.

Answer $7$

Understating accrual of warranty liability overstates current period income at the expense of future income.

Answer $8$

Understating accrual of warranty liability understates current period income to the benefit of future income.