[The Following Information Applies to the Questions Displayed Below

question 59

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 reflects the effect of the year-end adjustment to record estimated warranty expense?

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

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Definitions:

Net Realisable Value

The estimated selling price of an asset in the ordinary course of business minus any costs associated with its sale or disposal.

Conversion Costs

The combined costs of direct labor and manufacturing overheads incurred in converting raw materials into finished goods.

Job Cost Sheets

Documents that record and track the direct materials, direct labor, and manufacturing overhead costs allocated to an individual job or project.

Manufacturing Overheads

Indirect costs related to the production process, including utilities, depreciation of machinery, and factory rent.