During September, Excom Sold 100 Radios for $50 Each

question 54

Multiple Choice

During September, Excom sold 100 radios for $50 each. Each radio cost Excom $30 to purchase, and carried a two-year warranty. If 5% typically need to be replaced over the warranty period and one is actually replaced during September, for what amount in September would Excom debit Product Warranty Expense?

• A) $50
• B) $150
• C) $30
• D) $120

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Definitions:

Consuming Goods

The action of using up goods or products, thereby reducing inventory.

Generating Revenues

The process by which a company earns income through the sale of goods or services.

Expenses

Outflows or using up of assets, or incurring liabilities, as a result of operational activities intended to generate revenue.

Financial Statement

A summary report that quantitatively describes the financial health of a company, including balance sheets, income statements, and cash flow statements.