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Prepare the journal entries required for the three years

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Question - Brianna Ltd. estimates that it will be required to pay $45,000 in three years' time to settle a warranty obligation. The risk-free discount rate applied is 3.5 % and the probability of cash outflows has already been assessed in calculating the $45,000.

Part A: Required:

a) How is the provision accounted for over the three years? Use a table with the following headings to show how the amounts are calculated for the provision over the three years.

b) Prepare the journal entries required for the three years.

Part B: Required:

c) How is the re-estimation accounted for? (You do not need to redo the table as in 2.1 a. Show your calculations for any adjustment required for the journal entries.)

d) Prepare the journal entries.

Reference no: EM132555966

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