QUESTION 2 (20 MINUTES, 10 MARKS) Beats Co. (the Company) sell's headphones for $200 (with an associated direct initial manufacturing cost of $160) that includes a 3-year assurance warranty. Based on historical statistical information, many warranty claims occur in year 2 and 3 with almost no warranty claims occurring in year 1. A customer can submit a warranty claim at any time during the warranty period. The Company leases all its manufacturing equipment. In a recent meeting, the President of the company was puzzled by the accounting made a few statements: Statement 1: "I don't understand our financial statements. Why is our profit margin $30 on the sale of the product? It should be $40. There is an error in our accounting." (2.5 marks) Statement 2: "I noticed another error in the financial statements our warranty liability should be classified as non-current because historically many warranty claims occur in year 2 and 3 with almost no warranty claims occurring in year 1" (2.5 marks) Statement 3: "Is our accounting department delusional. I see our leased equipment recorded as an asset on our balance sheet. This is wrong. We do not own this asset - it's not ours." (2.5 marks) Statement 4: "We recently guaranteed a loan of one of our suppliers. We should be recording that as a liability". (2.5 marks)