In December Year 1, Lucas Corporation sold merchandise for $10,000 cash. Lucas estimated that $700 of warranty claims might be filed in regard to these sales. On February 12, Year 2, warranty work amounting to $550 was performed for one of the customers ($430 labor paid in cash and $120 from the materials inventory).Which of the following answers indicates the effect of the February 12, Year 2 transaction on the financial statements of Lucas Corporation? Assets=Liab.+EquityRevenue?Expense=Net Inc.Cash flowA.(430)=(550)+(120)NA?120=(120)(430) OAB.(550)=(550)+NANA?NA=NA(430) OAC.(550)=(550)+NANA?550=(550)(430) FAD.(550)=NA+(550)NA?550=(550)(430) OA
A. Choice A
B. Choice B
C. Choice C
D. Choice D
Answer: B
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