Reported Revenue is most likely to have been reduced by management’s discretionary estimate of: A. Warranty provisions. B. Inventory damage and theft. C. Interest to be earned on credit sales. And why?
Inventory management and theft inclusion in the Income statement - would reduce COGS -not revenue. Interest on credit sales - would increase credit sales. So my choice would be warranty provisions - when you say e.g. 2% of the revenue is warranty provisions - you reduce 2% and record revenue.
with CP on this one
You’re all correct (in giving the same answer as the correct answer). It threw me off because warranty expense is a line item on the income statement. It is not (at least that’s what I think) deducted from sales. This would be correct if net sales was calculated as sales minus warranty expense, but I’m not sure of that.
There is a difference between warranty provisions and warranty expense. Warranty expense is “expense” to meet a warranty situation. Warranty provision is what they had talked about in the level 1, FSA SS 10 (Taxes) chapter - where a company sets aside money in expectation of having to service a warranty request - and this would typically be say 2% of the sales amount or sth. like that.
cpk, are you saying that warranty expense is “actual” cost spent to service a waranty situation? say, a customer returns a damaged toaster and you replace it for him for $15…that means you would record $15 as warranty expense on I/S. I really doubt that, but if you’re sure, I’ll take your word for it 
We can find the definitive answer by looking at what gets included in *net* sales…too lazy to look.