Question: For Year 1 , Pac Co . estimated its two - year equipment warranty costs based on $ 1 0 0 per unit sold in

For Year 1, Pac Co. estimated its two-year equipment warranty costs
based on $100 per unit sold in Year 1. Experience during Year 2 indicated that the
estimate should have been based on $110 per unit. The effect of this $10 difference
from the estimate is reported:
a. In 2016 income from continuing operations.
b. As an accounting change, net of tax, below 2016 income from continuing
operations.
c. As an accounting change requiring 2015 financial statements to be restated.
d. As a correction of an error requiring 2015 financial statements to be restated.

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