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

The accounting records of Made from Clay Ceramics included the following balances at the end of the period:

■ writing assignment Made from Clay has determined that its warranty obligations at the end of the year are equal to €12,000. During 20X0, the business paid €5,000 to satisfy the warranty claims.

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

2. Show what Made from Clay will report on its income statement and balance sheet for this situation.

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