HKAS 37 Provisions question 會計

HKAS 37 Provisions question Let us to make a case to know the Product Warranty Liability. The ABC Company sold merchandise for $1,000,000 cash during the current period. Experience has indicated the warranty and guarantee costs will approximate 0.3% of sales. The indicated entries are Step 1. In year of sale: As sales take place:Cash………………………$1,000,000 Sales………………………………..$1,00,000 As year-end Warranty expense…………$3,000 Warranty liability………………$3,000Step 2.Subsequently, actual warranty expenditures of $2,750 were made during the warranty period: Warranty liability………………..$2,750 Cash (and other resources used)……..$2,750Insteal, if the actual expenditure was $4,700, the entry would be: Warranty liability………………..$3,000 Warranty expenses………………$1,700 Cash (and other resources used)…………$4,700

The entry is:

Dr. Warranty Expenses
Cr. Accrued Expenses

If finally, the company need to pay the warranty fee,

The Entery is:

Dr, Accrued Expenses
Cr. Bank/Cash