In 2021, a company estimates that warranty costs in the following year will be $25,000. Actual warranty costs in 2022 are only $20,000. What is the effect on the accounting equation when recording actual warranty costs in 2022?
A. Liabilities decrease.
B. Liabilities increase.
C. Stockholders' equity decreases.
D. Stockholders' equity increases.
Answer: A
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