Matching
Indicate whether each of the following statements is true or false.
Premises:
Net income is not affected by the payment of cash to settle a warranty claim.
Recording the payment of cash to settle a warranty claim increases expenses (Warranties Expense)and decreases liabilities (Warranties Payable).
Recognizing the warranty obligation increases the Warranties Payable account and decreases a revenue account.
Total assets are not affected by the adjustment to record the warranty obligation.
The extension of a warranty on goods sold normally represents a legal obligation to the seller of the goods.
Responses:
True
False
Correct Answer:
Premises:
Responses:
Net income is not affected by the payment of cash to settle a warranty claim.
Recording the payment of cash to settle a warranty claim increases expenses (Warranties Expense)and decreases liabilities (Warranties Payable).
Recognizing the warranty obligation increases the Warranties Payable account and decreases a revenue account.
Total assets are not affected by the adjustment to record the warranty obligation.
The extension of a warranty on goods sold normally represents a legal obligation to the seller of the goods.
Premises:
Net income is not affected by the payment of cash to settle a warranty claim.
Recording the payment of cash to settle a warranty claim increases expenses (Warranties Expense)and decreases liabilities (Warranties Payable).
Recognizing the warranty obligation increases the Warranties Payable account and decreases a revenue account.
Total assets are not affected by the adjustment to record the warranty obligation.
The extension of a warranty on goods sold normally represents a legal obligation to the seller of the goods.
Responses:
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