Tom Tom Toys, Incorporated has sales of $500,000 in Year 1. Tom Tom warrants its products and estimates warranty
expense to be 2% of sales. Which of the following shows how the year end adjusting entry for warranty expense would
affect the company's financial statements?
Multiple Choice
Balance Sheet
Income Statement
Assets
NA
-
Liabilities
(10,000)
+
Stockholders'
Equity
(10,000)
Revenue
NA
Expenses
10,000
Net Income
(10,000)
Assets
NA
Balance Sheet
Stockholders'
Liabilities
+
Equity
10,000
(10,000)
Assets
(10,000)
Balance Sheet
Stockholders'
Liabilities
+
Equity
NA
(10,000)
Assets
NA
Balance Sheet
Stockholders'
Liabilities
+
Equity
10,000
(10,000)
Income Statement
Revenue
NA
Expenses
10,000
Income Statement
Revenue
NA
Expenses
10,000
Income Statement
Revenue
NA
Expenses
10,000
Net Income
(10,000)
Net Income
(10,000)
Net Income
(10,000)