Chapter 18, Problem 13DQ

LO.2 Emerald Motors is an automobile dealer. The controller consults with you about the type of accounting used for a special offer to its new car customers. Emerald has offered to provide at no charge to the customer the first four recommended service visits (i.e., at 3,000, 6,000, 9,000, and 12,000 miles). It is a virtual certainty that all customers will exercise their rights to the service, and the cost of the services can be accurately estimated. The controller reasons that the estimated cost should be accrued when the sale of an automobile is made so that all of the costs of the sale can be matched with the revenue. How would you respond to the controller?