At the end of Year 1, Durango Company recorded an adjustment for its obligation under product warranties. During Year 2, it paid cash to settle warranty claims from its customers. The Year 2 warranty settlements are asset use transactions.

Question

Quizplus · Accepted Answer

Warranty settlements involve paying cash, which decreases the company's assets, making it an asset use transaction.

At the End of Year 1, Durango Company Recorded an Adjustment