Newton Company Settles a Liability by Making a Payment in Cash.How

question 162

Multiple Choice

Newton Company settles a liability by making a payment in cash.How does paying this liability affect the accounting equation of the business?

• A) assets and liabilities decrease
• B) liabilities decrease and equity increases
• C) assets and liabilities increase
• D) assets increase and equity decreases

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Definitions:

Quality Cost Report

A quality cost report is a financial analysis detailing the costs associated with preventing, detecting, and correcting defective work in a company.

Returns And Allowances

A reduction in sales revenue due to customers returning products or receiving allowances for defective or unsatisfactory goods.

External Failure Cost

The costs incurred when a product or service fails to meet quality standards after being delivered to the customer, including warranties and repairs.

Warranty Period

The specified time period during which a product is guaranteed to be free from defects and the manufacturer or seller will repair or replace defective parts at no charge.