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case two acc301

 case two acc301 Composition

Pleasant Co. manufactures specialized bike add-ons. The company is well known for product quality, and it has provided one of the best warranties in the industry on its higher-priced products—a life span guarantee, performing all the guarantee work in its shops. The warranty in these products is roofed in the sales price. Due to the latest introduction and growth in sales of some items targeted to the low price industry, Pleasant can be considering joining up with an additional company to complete the guarantee work on this kind of line of products, in the event that customers get a service deal at the time of first product order. Pleasant has called one to advise the corporation on the accounting for this fresh warranty arrangement. Instructions

In case your school has a subscription to the FASB Codification, go to log in and put together responses to the following. Provide Codification references for your answers. (a) Recognize the accounting literature that addresses the accounting for the type of independently priced warranty that Pleasurable is considering. (b) When are guarantee contracts considered separately listed? (c) Precisely what are incremental direct acquisition costs and how should they be remedied?

SOLUTION

(a)FASB ASC 605-20-25 tackles how income and costs from a separately priced extended warranty or product protection contract needs to be recognized.

(b)An Extended Warranty is an agreement to provide warranty safeguard in addition to the scope of coverage of the manufacturer's original warranty, if virtually any, or to expand the period of coverage furnished by the manufacturer's original warranty. Product Protection Contracts are agreements to execute certain agreed-upon services to keep a product for any specified period of time. The terms of the contract may take distinct forms, including an agreement to periodically execute a particular support a specified number of times more than a specified period of time, or a contract to perform a specific service while the need arises in the term of...

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