Coronado Industries has recently reported steadily increasing income. The company reported income of €20,400 in 2019, €25,500 in 2020, and €30,600 in 2021. A number of market analysts have recommended that investors buy Coronado shares because the analysts expect the steady growth in income to continue. Coronado is approaching the end of its fiscal year in 2022, and it again appears to be a good year. However, it has not yet recorded warranty expense. Based on prior experience, the 2022 warranty expense should be around €5,100, but some managers have approached the controller to suggest a larger, more conservative warranty expense should be recorded this year. Income before warranty expense is €43,200. Specifically, by recording a €6,700 warranty accrual this year, Coronado could report an increase in income for this year and still be in a position to cover its warranty costs in future years. (c) Assume income before warranty expense is €43,200 for both 2022 and 2023 and that total warranty expense over the 2-year period is €10,200. What is the appropriate accounting in this situation? Appropriate Accounting Income before warranty expense € Warranty expense Income € 2022 € 2023

Coronado Industries has recently reported steadily increasing income. The company reported income of €20,400 in 2019, €25,500 in 2020, and €30,600 in 2021. A number of market analysts have recommended that investors buy Coronado shares because the analysts expect the steady growth in income to continue. Coronado is approaching the end of its fiscal year in 2022, and it again appears to be a good year. However, it has not yet recorded warranty expense. Based on prior experience, the 2022 warranty expense should be around €5,100, but some managers have approached the controller to suggest a larger, more conservative warranty expense should be recorded this year. Income before warranty expense is €43,200. Specifically, by recording a €6,700 warranty accrual this year, Coronado could report an increase in income for this year and still be in a position to cover its warranty costs in future years. (c) Assume income before warranty expense is €43,200 for both 2022 and 2023 and that total warranty expense over the 2-year period is €10,200. What is the appropriate accounting in this situation? Appropriate Accounting Income before warranty expense € Warranty expense Income € 2022 € 2023

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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