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Estimating warranty expenses at 2%, when past history suggests they have experienced 5%, results in an overstatement of expenses and an understatement of liabilities.A. True
B. False

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olaposi007

Answer: option B: False

Explanation:

Liabilities and Expenses will both be understated

Answer:

False

Explanation:

Warranty accruals will be accounted for when incurred through the following entries,

Debit Warranty expense

Credit Warranty accrual

Using the history as a basis for accrual estimating the  warranty expenses at 2% instead of 5% would result in an understatement of the two accounts stated above.

These are the expense and accrual accounts. As such the answer is false