Bears Incsells Football Helmets to Local Schools and Warrants All of of Its

question 127

Multiple Choice

Bears Inc.sells football helmets to local schools and warrants all of its products for one year.While no helmets sold in 2012 have been returned to them yet,based upon previous years,Bears Inc.estimates that 3% of its products will need repairs or be replaced within the next year.What effect would this warranty have on assets,liabilities,and stockholders' equity in 2012?

• A)A decrease in assets and decrease in stockholders' equity.
• B)No journal entry is necessary until products under warranty are returned.
• C)An increase in stockholders' equity and a decrease in liabilities.
• D)A decrease in stockholders' equity and an increase in liabilities.

---

Definitions:

Unconscious

The part of the mind that is inaccessible to conscious thought but that affects behavior and emotions, according to psychoanalytic theory.

Id

In psychoanalysis, a part of the mind in which innate instinctive impulses and primary processes are manifest.

Ego

Part of the psyche that mediates between the conscious, the unconscious, and reality, operating based on the reality principle, according to Freudian theory.

Basic Traits

Fundamental personality characteristics that are relatively stable over time and across situations.