CMA Study Group

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  • 1.  A change in the liability with the perspective of warranty costs requires?

    Posted 24 days ago
    <cma-ques _ngcontent-xsq-c288="">A change in the liability with the perspective of warranty costs requires?</cma-ques><cma-ques-set _ngcontent-xsq-c288="" class="d-flex flex-column p-3 ng-star-inserted" style="font-size: 18px;">
    A. <cma-options _ngcontent-xsq-c288="" style="pointer-events: none;">restating prior-period financial statements.</cma-options>
    </cma-ques-set><cma-ques-set _ngcontent-xsq-c288="" class="d-flex flex-column p-3 ng-star-inserted" style="font-size: 18px;">
    B. <cma-options _ngcontent-xsq-c288="" class="correct" style="pointer-events: none;">reporting an adjustment to the beginning retained earnings balance in the statement of retained earnings.</cma-options>
    </cma-ques-set><cma-ques-set _ngcontent-xsq-c288="" class="d-flex flex-column p-3 ng-star-inserted" style="font-size: 18px;">
    C. <cma-options _ngcontent-xsq-c288="" style="pointer-events: none;" class="">presenting the effect of pro forma data on income and earnings per share for all prior periods presented.</cma-options>
    </cma-ques-set><cma-ques-set _ngcontent-xsq-c288="" class="d-flex flex-column p-3 ng-star-inserted" style="font-size: 18px;">
    D. <cma-options _ngcontent-xsq-c288="" style="pointer-events: none;" class="incorrect">reporting current and future financial statements on the new basis.

    It says Option B. is the correct answer, can anyone explain.
    </cma-options>
    </cma-ques-set>

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    Kiranraj Tanwar
    Director/Manager
    Nallasopara MH
    India
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  • 2.  RE: A change in the liability with the perspective of warranty costs requires?

    Posted 23 days ago
    B is the best asnwer, the warrnty cost liability is created when you receive payment in advance to service warranty
    Dr. Cash
    Cr, Warranty liability

    and then this liability is is credit to revenues in proportion on straight line method every ending reporting period (for example, 200 you receivded for service warranty for 2 years, you need to credited to revenues 50 every year)

    if the estimate is change, and you maybe over/under charged to revnues, you have to adjust the previous year profit and loss in the current year, in other word opening retained earnings)

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    Adnan
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  • 3.  RE: A change in the liability with the perspective of warranty costs requires?

    Posted 23 days ago
    change in accounting estimated is reported in current year not prior years

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    Zahid Ullah Aziz
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  • 4.  RE: A change in the liability with the perspective of warranty costs requires?

    Posted 23 days ago
    Warranty Costs are expenses. At the end of the year when the books are closed, the cost are transferred to the Income Summary as a debit and eventually move to Retain Earnings as a credit. Therefore a change to the liability would require an adjustment to RE.

    hope that helps,

    Chris Rotell

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    Chris Rotell
    Student
    Maple Valley WA
    United States
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  • 5.  RE: A change in the liability with the perspective of warranty costs requires?

    Posted 23 days ago
    well if you are recording it in current year it isn't called adjustment to prior year.

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    Zahid Ullah Aziz
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  • 6.  RE: A change in the liability with the perspective of warranty costs requires?

    Posted 23 days ago
    The correct answer is D warranty is example of provision and change in value of provision is change in accounting estimate and the effect of change in accounting estimate should be in prospect not in retrospect you would change opening retained earnings if it were a mistake or a change in accounting policy.

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    Zahid Ullah Aziz
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  • 7.  RE: A change in the liability with the perspective of warranty costs requires?

    Posted 23 days ago
    The correct answer is D warranty is example of provision and change in value of provision is change in accounting estimate and the effect of change in accounting estimate should be in prospect not in retrospect you would change opening retained earnings if it were a mistake or a change in accounting policy.

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    Zahid Ullah Aziz
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