[The Following Information Applies to the Questions Displayed Below

Multiple Choice

[The following information applies to the questions displayed below.]

In December Year 1, Lucas Corporation sold merchandise for $10,000 cash. Lucas estimated that the warranty obligation relating to this sale is $700. On February 12, Year 2, Lucas paid cash of $550 to settle a related warranty claim by this customer.

-Which of the following summarizes the effect of the recognition of the warranty obligation to the customer who purchased this merchandise on the elements of the Year 1 financial statements?

A) Option A
B) Option B
C) Option C
D) Option D