Indicate How Each Event Affects the Elements of Financial Statements

question 39

Essay

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Enter only one letter for each element.

-Kelly Co.sells goods to customers with a three-year warranty.During 2015,Kelly sold $800,000 of goods.On December 31,2015,Kelly made the appropriate year-end adjustment to record the warranty expense related to the goods sold during the year.During 2016,Kelly paid $4,000 cash to satisfy warranty claims.Show the effects of the 2015 adjustment to record warranty expense.

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Definitions:

Life Estate

A legal right to use and derive benefit from property for the duration of one's life, without ownership transferring until after death.

Mineral Rights

The legal rights to exploit and use minerals found beneath the surface of a parcel of land, which can be separated from the land's surface rights.

Water Rights

The legally granted permission to use water from a river, stream, or other body for designated purposes.

Airspace

The portion of the atmosphere above a particular land area, especially that controlled by a specific country or jurisdiction.