Case 2 Suzuki Group Presented below is the current liabilities section and related note of Suzuki Group. (yen in millions) Current Year Prior Year Current liabilities Current portion of long-term debt ¥ 15,000 ¥ 10,000 Short-term debt 2,668 405 Accounts payable 29,495 42,427 Accrued warranty 16,843 16,741 Accrued marketing programs 17,512 16,585 Other accrued liabilities 35,653 33,290 Accrued and deferred income taxes 16,206 17,348 Total current liabilities ¥133,377 ¥136,796 Notes to Consolidated Financial Statements Note 1 (in part): Summary of Significant Accounting Policies and Related Data Accrued Warranty The company provides an accrual for future warranty costs based upon the relationship of prior years' sales to actual warranty costs. The company provides an accrual for future warranty costs based upon the relationship of prior years' sales to actual warranty costs. Instructions Answer the following questions. a. What type of warranty is Suzuki providing to customers? b. Under what circumstance, if any, would it be appropriate for Suzuki to recognize unearned revenue on warranty contracts? c. If Suzuki recognized unearned revenue on warranty contracts, how would it recognize this revenue in subsequent periods?

Case 2 Suzuki Group Presented below is the current liabilities section and related note of Suzuki Group. (yen in millions) Current Year Prior Year Current liabilities Current portion of long-term debt ¥ 15,000 ¥ 10,000 Short-term debt 2,668 405 Accounts payable 29,495 42,427 Accrued warranty 16,843 16,741 Accrued marketing programs 17,512 16,585 Other accrued liabilities 35,653 33,290 Accrued and deferred income taxes 16,206 17,348 Total current liabilities ¥133,377 ¥136,796 Notes to Consolidated Financial Statements Note 1 (in part): Summary of Significant Accounting Policies and Related Data Accrued Warranty The company provides an accrual for future warranty costs based upon the relationship of prior years' sales to actual warranty costs. The company provides an accrual for future warranty costs based upon the relationship of prior years' sales to actual warranty costs. Instructions Answer the following questions. a. What type of warranty is Suzuki providing to customers? b. Under what circumstance, if any, would it be appropriate for Suzuki to recognize unearned revenue on warranty contracts? c. If Suzuki recognized unearned revenue on warranty contracts, how would it recognize this revenue in subsequent periods?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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