Read the problem and response to his manager.(Answer these questions rather than writing a memo)

1. Describe the accounting for warranty contingencies.
2. Describe what you would do to determine if an accrual should be made.
3. Should the warranty liability be journalized, noted in the financial statements or simply ignored altogether until an actual expense is recognized?Defend your answer.

me COMMUNICATING IN PRACTICE L C3 D BTN 11-2 Dusty Johnson is the accounting and finance manager for a manufacturer. At year-end, he must oks determine how to account for the company's contingencies. His manager, Tom Pretti, objects to Johnson's OK proposal to recognize an expense and a liability for warranty service on units of a new product introduced in the fourth quarter. Pretti comments, "There's no way we can estimate this warranty cost. We don't owe anyone anything until a product fails and it is returned. Let's report an expense if and when we do any ast warranty work." Im pMe Required ncial Prepare a one-page memorandum for Johnson to send to Pretti defending his proposal