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During Year 1, its first year of operations, Benitez Company reported sales of $360,000. At the end of Year 1, the company estimated its warranty obligation at 2% of sales. During Year 1, the company paid $4,800 cash to settle warranty claims. Which of the following statements is true? Multiple Choice All of these answer choices are correct. Warranty expenses would decrease net earnings by $7,200 in Year 1. The warranties payable account has a balance of $2,400 at the end of Year 1.

During Year 1, its first year of operations, Benitez Company reported sales of $360,000. At the end of Year 1, the company estimated its warranty obligation at 2% of sales. During Year 1, the company paid $4,800 cash to settle warranty claims. Which of the following statements is true? Multiple Choice All of these answer choices are correct. Warranty expenses would decrease net earnings by $7,200 in Year 1. The warranties payable account has a balance of $2,400 at the end of Year 1.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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During Year 1, its first year of operations, Benitez Company reported sales of $360,000. At the end of Year 1, the company estimated its warranty obligation at 2% of sales. During Year 1, the company paid $4,800 cash to settle warranty claims. Which of the following statements is true? Multiple Choice All of these answer choices are correct. Warranty expenses would decrease net earnings by $7,200 in Year 1. The warranties payable account has a balance of $2,400 at the end of Year 1. Cash decreased by $4,800 as a result of the accounting events associated with warranties in Year 1.
Transcribed Image Text:During Year 1, its first year of operations, Benitez Company reported sales of $360,000. At the end of Year 1, the company estimated its warranty obligation at 2% of sales. During Year 1, the company paid $4,800 cash to settle warranty claims. Which of the following statements is true? Multiple Choice All of these answer choices are correct. Warranty expenses would decrease net earnings by $7,200 in Year 1. The warranties payable account has a balance of $2,400 at the end of Year 1. Cash decreased by $4,800 as a result of the accounting events associated with warranties in Year 1.
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