Which Journal Entry Would Probably Be Made If the Modified $\begin{array}{l}2010\\\text { Warranty Expense } &\text { XX } \\\text { Estimated Liability under Warranties } &&\text { XX }\end{array}$

question 40

Multiple Choice

Which journal entry would probably be made if the modified cash basis of accounting for warranties is in use for a sale made in 2010?

• A)
• \(\begin{array}{l}
• 2010\\
• \text { Warranty Expense } &\text { XX } \\
• \text { Estimated Liability under Warranties } &&\text { XX }
• \end{array}\)
• B)
• \(\begin{array}{lr}
• 2011\\
• \text { Estimated Liability under Warranties } & \text { XX } \\
• \text { Cash } & \text { XX }
• \end{array}\)
• C)
• \(\begin{array}{l}
• 2010\\
• \text { Cash } & \text { XX } \\
• \text { Sales }& \text { XX } \\
• \text { Unearned Warranty Revenue }& \quad\quad\text { XX }
• \end{array}\)
• D)
• \(\begin{array} { l }
• \underline { 2011 } \\
• \text { Warranty Expense } & \text { XX }\\
• \text { Cash } & \text { XX }
• \end{array}\)

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Definitions:

Accounts Receivable

Amounts receivable by a business from its clients for goods or services that have already been delivered, but payment is pending.

Inventory

The complete inventory of products and materials that a business keeps for the aim of selling or using in manufacturing.

Quick Ratio

A liquidity metric that measures a company's ability to cover its short-term obligations with its most liquid assets, excluding inventory.

Quick Assets

Assets that can be quickly converted into cash without losing value, including cash, marketable securities, and accounts receivable.