For Year 1, Pac Co. has a standard assurance-type warranty on its equipment. It estimated its 2-year equipment warranty costs based on $100 per unit sold in Year 1.
For Year 1, Pac Co. has a standard assurance-type warranty on its equipment. It estimated its 2-year equipment
warranty costs based on $100 per unit sold in Year 1. Experience during Year 2 indicated that the estimate should have been based on $110 per unit. The effect of this $10 difference from the estimate is reported In Year 2 income from continuing operations.
As a cumulative amount, net of tax, below Year 2 income from continuing operations.
As a correction of an error requiring Year 1 financial statements to be restated.
As an accounting change retrospectively applied to the Year 1 financial statements.
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