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During Year 1,its First Year of Operations,Benitez Co

Question 69

Multiple Choice

During Year 1,its first year of operations,Benitez Co.reported sales of $800,000.At the end of Year 1,the company estimated its warranty obligation at 3% of sales.During Year 1,the company paid $13,000 cash to settle warranty claims.Which of the following statements is true?


A) Warranty expenses would decrease net earnings by $24,000 in Year 1.
B) Cash decreased by $13,000 as a result of the accounting events associated with warranties in Year 1.
C) The warranties payable account has a credit balance of $11,000 at the end of Year 1.
D) All of these answer choices are correct.

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