ACCA · Question 20 · Presentation of Financial Statements
SECTION B - CASE 1: AeroTech Drones
AeroTech Drones Co manufactures specialized agricultural drones. The year-end is 31 December 20X5.
AeroTech sells its drones with a standard one-year warranty. Based on past experience, 80% of drones will have no defects, 15% will have minor defects costing $200 to repair, and 5% will have major defects costing $1,000 to repair. During 20X5, AeroTech sold 5,000 drones.
How should the warranty provision calculated above be classified in the Statement of Financial Position at 31 December 20X5?
Answer options:
Entirely as a non-current liability.
Entirely as a current liability.
Split equally between current and non-current liabilities.
It should not be recognized, only disclosed as a contingent liability.
32 questions · hints · full answers · grading
Expert