During Year 1, its first year of operations, Benitez Company reported sales of $200,000. At the end of Year 1, the company estimated its warranty obligation at 2% of sales. During Year 1, the company paid $2,400 cash to settle warranty claims. Which of the following statements is true?

Multiple Choice

-All of these answer choices are correct.

-The warranties payable account has a balance of $1,600 at the end of Year 1.

-Warranty expenses would decrease net earnings by $4,000 in Year 1.

-Cash decreased by $2,400 as a result of the accounting events associated with warranties in Year 1.