Explain the reason of Ms. T wishing to conduct business transactions using cash not through check or credit card.

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Question text A company sells a product with an associated warranty. (The customer must separately purchase the warranty at the time the related product is purchased). After the sale of a particular warranty, the company records the following journal entry: Cash 500 Warranty Liability 500 What error now exists in the company’s financial statements? Select one: a. Liabilities are understated. b. Liabilities are overstated. C. Net income is understated. d. No error exists, as the entry has been properly recorded.

Answer 1

Question

Chapter 11, Problem 3CP

a.

To determine

Explain the reason of Ms. T wishing to conduct business transactions using cash not through check or credit card.

b.

To determine

Explain the response that should be given by Mr. M to Ms. T’s suggestion.

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