X Ltd Sold 2000 Computers in June

Essay

X Ltd sold 2000 computers in June. The terms of sale included a 12-month warranty. The warranty provides that X Ltd will meet the cost of repairs that are associated with faulty parts attributable to manufacture. Past experience indicates that 10% of computer sales lead to warranty claims at an average cost of $70 for parts and $100 for labour, per computer.
Discuss whether the warranty commitment would meet the definition and recognition criteria of a liability to the firm at 30 June.