Exercise 9-7A (Algo) Effect of warranty obligations and payments on financial statements LO 9-4 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 $1,060. During this period, a customer returned a product that cost $795 to repair. Required a. Show the effects of these transactions on the financial statements using a horizontal statements model. (Use a to indicate increase or a - for decrease. In the Statement of Cash Flows column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA) Columns for events that have no effect on any of the elements should be left blank.) (Note: Not all cells will require on input.) CHAIR COMPANY Horizontal Statements Model Event Assets Balance Sheet -Liabilities Income Statement Statement of Stockholder's Equity Revenue Expense-Net Income Cash Flows Estimates Paid Required Use the following information to prepare a classified balance sheet for Alpha Co. at the end of Year 1. Accounts receivable $41,950 Accounts payable 9,375 Cash 15,690 Common stock 44,000 Land 28,590 Long-term notes payable 22,850 Merchandise inventory Retained earnings 31,125 41,130 Current assets ALPHA CO. Classified Balance Sheet As of December 31, Year 1 Total current assets Property, plant and equipment Total property, plant and equipment Total assets Current liabilities 0 $ 0 Liabilities and Stockholders' Equity