Benitez Company Had Sales of $680,000 in Year 1

Multiple Choice

Benitez Company had sales of $680,000 in Year 1. The company expects to incur warranty expenses amounting to 3% of sales. There were $18,300 of warranty obligations paid in cash during Year 1. Based on this information:

A) Warranty expenses would decrease net earnings by $20,400 in Year 1.
B) Cash would decrease by $18,300 as a result of the accounting events associated with warranties in Year 1.
C) The warranties payable account would increase by $2,100 in Year 1.
D) All of these answer choices are correct.