Cynthia Cooper is the accounting manager for a manufacturing company. One of her responsibilities at year-end is to determine how to account for the company's contingencies. She has proposed a journal entry to recognize an expense and a liability for warranty service related to a new product that was introduced in the fourth quarter. The CFO, Andy Fastow, does not want to record the journal entry. He states that there is no way to estimate the warranty cost since it is a new product. He also contends, "We don't owe anyone anything until a product fails and is returned. We'll report an expense if and when we do any warranty work. Don't forget that our bonuses are based on net income." Write a professional email from Cooper to Fastow defending the proposed journal entry. Make sure to include a suggestion of how the warranty cost can be estimated as this is a new product. Does the warranty accrual decision create an ethical dilemma for Cooper and/or Fastow? If so, how should this be addressed?

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1 The professional email is provided below To Mr Andy Fastow Sub Accounting treatment for expenses and liabilities for warranty service related to the ... View the full answer