[The following information applies to the questions displayed below.]In December Year 1, Lucas Corporation sold merchandise for $10,000 cash. Lucas estimated that the warranty obligation relating to this sale is $700. On February 12, Year 2, Lucas paid cash of $550 to settle a related warranty claim by this customer.Which of the following summarizes the effect of the recognition of the warranty obligation to the customer who purchased this merchandise on the elements of the Year 1 financial statements? Assets=Liab.+EquityRevenue?Expense=Net Inc.Cash FlowA.NA=(700)+700700?NA=700NAB.(700)=NA+(700)NA?700=(700)(700) OAC.(700)=(700)+NANA?NA=NA(700) OAD.NA=700+(700)NA?700=(700)NA
A. Option A
B. Option B
C. Option C
D. Option D
Answer: D
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