For 2012, P Co

Multiple Choice

For 2012, P Co. estimated its two-year equipment warranty costs based on $23 per unit sold in 2012. Experience during 2013 indicated that the estimate should have been based on $25 per unit. The effect of this $2 difference from the estimate is reported:

A) In 2013 income from continuing operations.
B) As an accounting change, net of tax, below 2013 income from continuing operations.
C) As an accounting change requiring 2012 financial statements to be restated.
D) As a correction of an error requiring 2012 financial statements to be restateD.The change in the estimate for warranty costs is based on new information obtained from experience and qualifies as a change in accounting estimate.A change in accounting estimate affects current and future periods and is not accounted for by restating prior periods.The accounting change is a part of continuing operations but is not reported net of taxes.