(Learning Objective 1: Accounting for warranty expense and the related liability)

The accounting records of From the Earth Ceramics included the following balances at the end of the period:

From the Earth has determined that its warranty obligations at the end of the period are equal to $11,000. During 20X0, the business paid $4,000 to satisfy the warranty claims.

❙ Requirements 1. Journalize From the Earth’s warranty expense for the period and the company’s cash payments to satisfy warranty claims. Explanations are not required.

2. Show what From the Earth will report on its income statement and balance sheet for this situation.

3. Which data item from Requirement 2 will affect From the Earth’s current ratio? Will From the Earth’s current ratio increase or decrease as a result of this item?