A company switched from the cash basis to the accrual basis for recognizing warranty expense. The unrecorded liability for warranties was $2.4 million at the beginning of the year. Its tax rate is 25%. The company booked a year-end warranty liability of $3 million. As a result of this change, the firm would: Multiple Choice Report a current period charge decreasing net income by $600,000. Report a prior period adjustment decreasing retained earnings by $1,800,000. Report a prior period adjustment decreasing retained earnings by $600,000. Report a current period charge decreasing net income by $1,800,000.
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A company switched from the cash basis to the accrual basis for recognizing warranty expense. The un...
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