![Principles of Accounting](https://www.bartleby.com/isbn_cover_images/9781133626985/9781133626985_largeCoverImage.gif)
Never Flake Company provided a rust-prevention coating for the underside of new automobiles. The company advertised widely and offered its services through new-car dealers. When a dealer sold a new car, the salesperson attempted to sell the rust-prevention coating as an option. A key selling point was Never Flake’s warranty, which stated that it would repair any damage due to rust at no charge for as long as the buyer owned the car.
For several years, Never Flake had been very successful, but in 2013, the company suddenly declared bankruptcy. Company officials said that the firm had only $5.5 million in assets against liabilities of $32.9 million. Most of the liabilities represented potential claims under the company’s lifetime warranty. It seemed that owners were keeping their cars longer than they had previously. Therefore, more damage was being attributed to rust.
Discuss what accounting decisions could have helped Never Flake to survive under these circumstances.
![Check Mark](/static/check-mark.png)
Want to see the full answer?
Check out a sample textbook solution![Blurred answer](/static/blurred-answer.jpg)
Chapter 3 Solutions
Principles of Accounting
- I want the correct answer with accountingarrow_forwardI want the correct answer with accounting questionarrow_forwardOriole Company sells product 2005WSC for $55 per unit and uses the LIFO method. The cost of one unit of 2005WSC is $52, and the replacement cost is $51. The estimated cost to dispose of a unit is $6, and the normal profit is 40% of selling price. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-market?arrow_forward
- Business Its Legal Ethical & Global EnvironmentAccountingISBN:9781305224414Author:JENNINGSPublisher:Cengage