Business, 08.12.2021 23:00 eastonstelter

IFRS 15 Entity A manufactures and sells electronic goods. One particular product, Product X, is sold with a six-month manufacturer’s warranty. Entity A also offers customers the option to purchase an extended warranty on Product X. Under the extended warranty, Entity A will repair products that become defective within 24 months from the date the manufacturer’s warranty ends. Product X is sold for €640 per unit. A customer can purchase Product X plus the extended warranty at a combined price of €720. Entity A’s financial year ends on 31 December. As at 31 December 20x6, Entity A estimates, based on its past experience and the number of units of Product X sold in 20x6, that costs of €20,000 will be incurred to repair products that become defective within six months of their sale.

Required:

1. Explain how the sale of Product X plus the related warranties should be accounted for in the financial statements of Entity A.

2. IFRS 15 identifies two types of

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IFRS 15 Entity A manufactures and sells electronic goods. One particular product, Product X, is so...

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