Jaye's Company Paid $750 Cash to Replace a Part on Equipment

question 136

Multiple Choice

Jaye's Company paid $750 cash to replace a part on equipment sold under warranty. To recognize the payment, which of the following are correct?

• A)Debit Warranty Payable and credit Cash
• B)Debit Warranty Expense and credit Cash
• C)Debit Equipment Expense and credit Cash
• D)Debit Parts Expense and credit Cash

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Definitions:

Risk-Free Rate

The theoretical return on investment with no risk of financial loss, typically represented by the yield on government securities.

Actual Return

The real gain or loss that an investment has earned, including dividends, interest, and capital gains, over a specified time period.

Underpriced

A term describing an asset or security that is sold in the market for less than its intrinsic or true value.

Risk Premium

The extra return expected by an investor for holding a risky asset over a risk-free asset.