(Answered) Question - benson company sells two products grey and

Accounting

Question - Benson Company sells two products, Grey and Yellow. Each carries a one-year warranty.

1. Product Grey-Product warranty costs, based on past experience, will normally be 1% of sales.

2. Product Yellow-Product warranty costs cannot be reasonably estimated because this is a new product line. However, the chief engineer believes that product warranty costs are likely to be incurred.

Instructions - How should Benson report the estimated product warranty costs for each of the two types of merchandise above? Discuss the rationale for your answer. Do not discuss disclosures that should be made in Benson's financial statements or notes.

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