EX 10-20 Accrued product warranty
General Motors Corporation (GM) disclosed estimated product warranty payable for comparative years as follows:
|
(in millions) |
||
|
Year 2 |
Year 1 |
|
|
Current estimated product warranty payable |
$2,587 |
$2,965 |
|
Noncurrent estimated product warranty payable |
4,202 |
4,065 |
|
Total |
$6,789 |
$7,030 |
GM’s sales were $135,592 million in Year 2. Assume that the total paid on warranty claims during Year 2 was $3,000 million.
a. Why are short- and long-term estimated warranty liabilities separately disclosed?
b. Provide the journal entry for the Year 2 product warranty expense.
c. What two conditions must be met in order for a product warranty liability to be reported in the financial statements?