The Clarion Company provides a one-year warranty on all merchandise it sells. In Year 1, the company recorded sales of $500,000. It estimated that the warranty costs on these sales would amount to $2,000. In July, Year 2, Clarion paid $250 to satisfy a warranty claim. Indicate whether each of the following statements is true or false.
_____ a) Clarion's recognition of the warranty obligation at the end of Year 1 reduced total assets and total equity.
_____ b) Clarion's recognition of the warranty obligation at the end of Year 1 increased Clarion's total liabilities.
_____ c) The July, Year 2 transaction reduced total assets and net income for Year 2.
_____ d) The July, Year 2 transaction reduced Clarion's total liabilities.
_____ e) The recognition of the warranty obligation at the end of Year 1 did not affect Clarion's revenue for the year.

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The Answer of The Clarion Company provides a one-year warranty on all merchandise it sells. In Year 1, the company recorded sales of $500,000. It estimated that the warranty costs on these sales would amount to $2,000. In July, Year 2, Clarion paid $250 to satisfy a warranty claim. Indicate whether each of the following statements is true or false.
_____ a) Clarion's recognition of the warranty obligation at the end of Year 1 reduced total assets and total equity.
_____ b) Clarion's recognition of the warranty obligation at the end of Year 1 increased Clarion's total liabilities.
_____ c) The July, Year 2 transaction reduced total assets and net income for Year 2.
_____ d) The July, Year 2 transaction reduced Clarion's total liabilities.
_____ e) The recognition of the warranty obligation at the end of Year 1 did not affect Clarion's revenue for the year.

The Clarion Company Provides a One-Year Warranty on All Merchandise