Vagabond Ltd manufactures handbags and provides a six-month quality warranty. The provision for warranty account has a credit balance of $50,000 and the estimated future obligations for warranty work is $190,000. The adjustment necessary to update the provision account is a:

Question

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The warranty provision must be increased to $190,000. As provision accounts normally have a credit balance, a credit entry for $140,000 is required.

Vagabond Ltd Manufactures Handbags and Provides a Six-Month Quality Warranty