Question: There is a mini case below, please state one financial reporting error and provide a solution. NIKE is concerned that their current method of selling

There is a mini case below, please state one financial reporting error and provide a solution. NIKE is concerned that their current method of selling lights with an “ATTACHED” warranty is lowering their net income. If they sold these new shoes with a warranty that could also be sold separately, then they could use the accounting method of “Revenue deferral” and thereby not have to expense the warranty expense at time of sale of the new shoes. The CFO has asked you to explain if switching the method of accounting for the warranty will increase earnings at time of sale or not. The estimated warranty cost of the super shoes is 250. The selling price of each of these shoes is 2500. What is the issue here? and what is the solution?

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