Use the Following to Answer Questions

question 32

Short Answer

Use the following to answer questions
In December 2016,Lucas Corporation sold merchandise for $10,000 cash.Lucas estimated that $700 of warranty claims might be filed in regard to these sales.On February 12,2017,warranty work amounting to $550 was performed for one of the customers ($430 labor paid in cash and $120 from the materials inventory).
53.Which of the following answers correctly shows the effect of the recognition of the warranty obligation at the end of 2016 on the financial statements of Lucas?
A.
B.
C.
D.
Answer: D
Learning Objective: 09-04
Topic Area: Warranty obligations
AACSB: Analytical Thinking
AACSB: Knowledge Application
AICPA: FN Measurement
AICPA: BB Critical Thinking
Blooms: Analyze
Blooms: Apply
Level of Difficulty: 2 Medium
Feedback: The entry to estimate future warranty costs related to 2016 sales increases expenses (warranty expense),which decreases net income and equity,and increases liabilities (warranties payable).
-Which of the following answers indicates the effect of the February 12,2017 entry on the financial statements of Lucas Corporation?

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Definitions:

Toxic Effect

Harmful physiological effects caused by exposure to toxic substances or chemicals.

Controlled Substances

Drugs or chemicals whose manufacture, possession, and use are regulated by the government due to their potential for abuse or addiction.

Unused Quantities

Items or substances not yet utilized or consumed.

Esophageal Stricture

The narrowing of the esophagus, which can cause difficulty in swallowing, often resulting from inflammation or scarring.