Indicate Whether Each of the Following Statements Is True or False

question 96

True/False

Indicate whether each of the following statements is true or false.
a)The extension of a warranty on goods sold normally represents a legal obligation to the seller of the goods.b)Recognizing the warranty obligation increases the Warranties Payable account and decreases a revenue account.c)Recording the payment of cash to settle a warranty claim increases expenses (Warranties Expense)and decreases liabilities (Warranties Payable).d)Net income is not affected by the payment of cash to settle a warranty claim.e)Total assets are not affected by the adjustment to record the warranty obligation.

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Definitions:

Premium on Bonds Payable

The amount by which the sale price of a bond exceeds its face value, reflecting higher-than-market interest rates or increased demand for the bond.

Amortization

The process of spreading out a loan or intangible asset cost over a fixed period of time for accounting and tax purposes.

Straight-Line Method

A method of allocating the cost of an asset evenly over its useful life.

Callable Bonds

Securities that the issuer has the option to repurchase before they reach their due date, at a specified call price.