What is the primary tax authority


Question: Norse LLC, an accrual basis computer manufacturer, began offer a two-year warranty on their computers sold in 20X1.  Based upon 20X1 sales they have recorded a warranty liability of $75,000. As of December 31, 20X1, they have paid out $45,000 in expenses honoring warranties, and they estimate that the remaining warranty claims yet to be filed on 20X1 sales are$16,000. In 20X2, the remaining claims from 20X1 sales that were filed in 20X2 turned out to be $ 16,500, all of which were completely repaired within the first four months of the year. What is the allowable warranty expense for tax purposes? What is the primary tax authority?

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Taxation: What is the primary tax authority
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