General Motors Corporation (GM) disclosed estimated product warranty payable for comparative years as follows:
(in millions)
Year 2................Year 1
Current estimated product warranty payable...................$3,059................$2,884
Noncurrent estimated product warranty payable................4,327..................4,147
Total..................................................................$7,386...............$7,031
Presume that GM's sales were $135,592 million in Year 2 and that the total paid on warranty claims during Year 2 was $3,000 million.
a. Why are short- and long-term estimated warranty liabilities separately disclosed?
b. Provide the journal entry for the Year 2 product warranty expense.
c. What two conditions must be met in order for a product warranty liability to be reported in the financial statements?