Provision for Warranty Costs at Tesla

• Values:

• Estimated Warranty Costs: $500,000
• Actual Warranty Claims: $100,000
• Warranty Period: 1 year
• Requirements:

0. Apply the conservatism principle to estimate warranty provision.
1. Calculate warranty expense using the matching concept.
2. Discuss how Tesla manages warranty costs in its financial statements.
3. Recommend strategies to minimize warranty liabilities.