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A manufacturer of audio equipment offers a warranty to remedy manufacturing defects, at no cost to the customer, if identified within six months of sale,
A manufacturer of audio equipment offers a warranty to remedy manufacturing defects, at no cost to the customer, if identified within six months of sale, but customarily has extended this facility for up to nine months. During the year to 31st December 2019 the sales, made evenly through the year, amounted to N$24 million. Past Experience has been that around 5% of items sold return for remedial treatment and remedial work costs, on average, 3% of sale price. How should the manufacturer report its obligation for remedying manufacturing defects as at 31st December 2019? O a. N$18,000 as a provision O b. N$27,000 as a provision O c. N$18,000 as a liability O d. O e. N$27,000 as a liability
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