During Year 1, its first year of operations, Benitez Co. reported sales of $600,000. At the end of Year 1, the company estimated its warranty obligation at 3% of sales. During Year 1, the company paid $15,700 cash to settle warranty claims. Which of the following statements is true?
A. Cash decreased by $15,700 as a result of the accounting events associated with warranties in Year 1.
B. The warranties payable account has a credit balance of $2300 at the end of Year 1.
C. Warranty expenses would decrease net earnings by $18,000 in Year 1.
D. All of these answer choices are correct.
Answer: D
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