Tom Toys has sales of $250,000 in Year 1. Tom warrants its products and estimates warranty expense to be 2% of sales. Which of the following shows how the year-end adjusting entry for warranty expense would affect the company’s financial statements?**Balance Sheet**| Assets | = | Liabilities | + | Stockholders’ Equity |**Income Statement**| Revenue | – | Expense | = | Net Income |**Statement of Cash Flows**- **Option A**: - Balance Sheet: - Assets: n/a - Liabilities: (5,000) - Equity: (5,000) - Income Statement: - Revenue: n/a - Expense: 5,000 - Net Income: (5,000) - Statement of Cash Flows: n/a- **Option B**: - Balance Sheet: - Assets: n/a - Liabilities: 5,000 - Equity: (5,000) - Income Statement: - Revenue: n/a - Expense: 5,000 - Net Income: (5,000) - Statement of Cash Flows: (5,000) OA- **Option C**: - Balance Sheet: - Assets: (5,000) - Liabilities: n/a - Equity: (5,000) - Income Statement: - Revenue: n/a - Expense: 5,000 - Net Income: (5,000) - Statement of Cash Flows: n/a- **Option D**: - Balance Sheet: - Assets: n/a - Liabilities: 5,000 - Equity: (5,000) - Income Statement: - Revenue: n/a - Expense: 5,000 - Net Income: (5,000) - Statement of Cash Flows: n/a**Multiple Choice Options**- Option A- Option C- Option D- Option B

These are the accounting transactions that are having a monetary impact on the financial statement…

Answered: Tom Toys has sales of $250,000 in Year…

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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Ivanhoe Factory provides a 2-year warranty with one of its products which was first sold in 2020. Ivanhoe sold $909,800 of products subject to the warranty. Ivanhoe expects $124,480 of warranty costs over the next 2 years. In that year, Ivanhoe spent $73,090 servicing warranty claims. Prepare Ivanhoe's journal entry to record the sales (ignore cost of goods sold) and the December 31 adjusting entry, assuming the expenditures are inventory costs. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date 2020 During 2020 12/31/20 Account Titles and Explanation (To record sales) (To record warranty claims) Debit Credit
During Year 1, its first year of operations, Benitez Co. 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 Warranty expenses would decrease net earnings by $7,200 in Year 1. All of these answer choices are correct. 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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Tom Toys has sales of $250,000 in Year 1. Tom warrants its products and estimates warranty expense to be 2% of sales. Which of the following shows how the year end adjusting entry for warranty expense would affect the company's financial statements?