[The Following Information Applies to the Questions Displayed Below

question 49

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 summarizes the effect of the payment of cash to settle the warranty claim in Year 2 on the elements of the financial statements?

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

Ability to apply income division rules according to partnership agreements and activities.

Understand how net income is divided among partners based on capital, salaries, and predetermined ratios.

Knowledge of the allocation of net loss among partners.

Understand the principle of fair market value in the contribution of assets to a partnership.