You are a CPA working for GE. You are responsible for managing the manufacturer’s warranties and the point of sale, add-on-warranties that customers purchase:
- Explain the accounting for each warranty type, along with the impact on the financial statements.
- Explain why the reporting of each differs.
- Include each type of warranty’s redemption and expiration process and their effect on the income statement and balance sheet.
- Differentiate between a determinable current liability and a contingent liability. Please describe the conditions that should be present for recording a contingent liability.