Indicate how each event affects the elements of the financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Increase = IDecrease = DNo Effect = NA(Note that "No Effect" means that the event either does not affect the element of the financial statements or that the event causes an increase in that element and is offset by a decrease in that same element.) Kelly Co. sells goods to customers with a three-year warranty. Previously, Kelly made the appropriate year-end adjustment to record the warranty expense related to the goods sold during the preceding year. During the current year, Kelly paid $4,000 cash to satisfy warranty claims. Show the effects of the 2016 payments to satisfy warranty
claims.AssetsLiabilitiesStk. EquityRevenuesExpensesNetStmt. of ?IncomeCash Flows???????
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(D) (D) (NA) (NA) (NA) (NA) (D)
The payments to satisfy warranty claims decrease assets (cash) and decrease liabilities (warranties payable). They do not affect the income statement. The payments are reported as cash outflows for operating activities.
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