If Product X Cost $50 and Had a 4 Percent

question 195

Multiple Choice

If product X cost $50 and had a 4 percent failure rate during the warranty period,the entry to record the estimated product warranty expense in a month when 1,000 units are sold would be

• A) Product Warranty Expense 2,000
• Estimated Product Warranty Liability 2,000
• B) Product Warranty Expense 200
• Estimated Product Warranty Liability 200
• C) Product Warranty Expense 20
• Cash 20
• D) Estimated Product Warranty Liability 50
• Cash 50

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Definitions:

Euros

The official currency of the Eurozone, used by 19 of the 27 European Union countries.

Controlling Influence

The power or authority one entity has over another, typically in the context of a parent company's significant influence over the operations and decision-making of its subsidiary.

Consolidation Method

An accounting technique used when a company owns more than 50% of another company, requiring the financial statements of both companies to be combined as one.

Equity Securities

Equity securities represent ownership interest held by shareholders in an entity, such as stocks, signaling a claim on its proportionate share in the corporation's assets and profits.