EX 11-20 Accrued product warranty
General Motors Corporation disclosed estimated product warranty payable for comparative years as follows:
|
(in millions) |
||
|
12/31/08 |
12/31/07 |
|
|
Current estimated product warranty payable |
$3,792 |
$4,655 |
|
Noncurrent estimated product warranty payable |
4,699 |
4,960 |
|
Total |
$8,491 |
$9,615 |
GM’s sales were $177,594 million in 2007 and decreased to $147,732 million in 2008. Assume that the total paid on warranty claims during 2008 was $5,000 million.
a. Why are short- and long-term estimated warranty liabilities separately disclosed?
b. Provide the journal entry for the 2008 product warranty expense.
c. What two conditions must be met in order for a product warranty liability to be reported in the financial statements?