Multiple Choice
In May,Fish Nets,Inc.sold 8,000 nets with a three-month warranty for $10 each on account.Fish Nets estimates that warranty costs will be approximately $100 on these sales.What effect will the warranty adjusting entry have on Fish Nets' current ratio?
A) It will cause the current ratio to increase.
B) It will cause the current ratio to decrease.
C) It will have no effect on the current ratio because the entry will cause the current assets to increase by $100 and the current liabilities to decrease by $100.
D) It will have no effect on the current ratio because no adjusting entry is made for estimated warranty costs.
Correct Answer:
Verified
Correct Answer:
Verified
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