In its first month of business,Fish Nets,Inc.sold 8,000 nets with a three-month warranty for $10 each on account.Fish Nets estimates that 1% of its sales will be uncollectible and that warranty costs will be approximately $100 on its sales.Fish Nets' financial statements should include ________.
A)Bad debts expense of $800 and Warranty expense of $100 on its income statement
B)Allowance for uncollectible accounts of $(80)and nothing for the warranties on its balance sheet
C)Bad debts expense of $80 and Warranty expense of $100 on its income statement
D)Allowance for uncollectible accounts of $(80)and Unearned warranty of $100 on its balance sheet

Question

Quizplus · Accepted Answer

Bad debts expense is recognized on the income statement, and allowance for uncollectible accounts is recognized on the balance sheet. Warranty expense is recognized on the income statement, and unearned warranty is recognized on the balance sheet.

In Its First Month of Business,Fish Nets,Inc