Accounting Policies, Accounting Estimates

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Instructions:

Discuss whether each of the following is a policy or an estimate under accounting for Company A:

$1.$ The estimated functional life of depreciable plant is six years.

$2.$ Company A recognizes revenue from service contracts according to the degree of completion.

$3.$ Company A determines that it will calculate its warranty provision based on its historical knowledge of defective products.

$4.$ Based on last year's warranty claims equivalent to $1\%$ of sales, the current year's warranty provision is calculated as $1\%$ of current year sales.