Pleasant Co. Essay

Pleasant Co. manufactures specialty bike accessories. The attach to is known for product quality, and it has offered one of the best(p) warranties in the industry on its higher-priced productsa lifetime guarantee, make outing all the indorsement work in its own shops. The guarantee on these products is included in the gross gross price. Due to the recent introduction and appendage in sales of some products targeted to the upset price market, Pleasant is considering partnering with another beau monde to do the sanction work on this line of products, if customers purchase a work induce at the time of authoritative product purchase. Pleasant has called you to advise the confederation on the accounting for this new stock warrant arrangement. InstructionsIf your school has a subscription to the FASB Codification, go to log in and prepare responses to the following. depict Codification references for your responses. (a) Identify the accounting literature that addresses the accounting for the type of severally priced stock warrant that Pleasant is considering. (b) When are warranty peg downs considered independently priced? (c) What are incremental direct learning costs and how should they be treated? solving(a)FASB ASC 605-20-25 addresses how revenue and costs from a disjoinedly priced extended warranty or product maintenance contract should be recognized.(b)An wide Warranty is an bargain to provide warranty protection in addition to the background of reporting of the manufacturers overlord warranty, if any, or to extend the menstruum of coverage provided by the manufacturers original warranty. Product Maintenance Contracts are agreements to come certain agreed-upon services to maintain a product for a specify period of time. The terms of the contract may bourgeon different forms, such as an agreement to periodically perform a situation service a specified calculate of times over a specified period of time, or an agreement to perform a particular service as the need arises over the term of the contract. on an individual basis Priced Contracts are agreements under which the customer has the filling to purchase an extended warranty or a product maintenance contract for an expressly stated amount separate from the price of the product. FASB ASC 605-20-20-20 (Glossary)(c)Costs that are directly connect to the acquisition of a contract and that would earn not been incurred but for the acquisition of that contract (incremental direct acquisition costs) shall be deferred and charged to expense in proportion to the revenue recognized. All other costs, such as costs of services performed under the contract, habitual and administrative expenses, advertising expenses, and costs associated with the duologue of a contract that is not consummated, shall be charged to expense as incurred. FASB ASC 605-20-25-4