Exercise 7-7 Effect of warranty obligations and payments on financial statements LO 7-4 The Chair Company provides a 120-day parts-and-labor warranty on all merchandise it sells. The Chair Company estimates the warranty expense for the current period to be $1,400. During the period, a customer returned a product that cost $1,050 to repair. Required a. Show the effects of these transactions on the financial statements using a horizontal statements model like the example shown here. Use a + to indicate increase or a - for decrease if the element is not affected, leave the cell blank. In the Cash Flow column indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). (Not all cells will require entry.) CHAIR COMPANY Horizontal Statements Model Balance Sheet Income Statement Liabilities Stockholder's Equity Revenue - Expense - Net Income Event Assets Statement of Cash Flow Estimates Paid