On August $1,$ YR$01,$ Best Buy sold a television to Mr$.$ Smith. The purchase price of the television was $$500$ and it came with a

one$-$year assurance warranty covering the period August $1,$ YR$01$ to July $31,$ YR$02.$ In addition, Mr$.$ Smith purchased a

separate $2-$year extended $($service$-$type$)$ warranty covering the television for $$60.$ The extended warranty covers the period

August $1,$ YR$02$ to July $31,$ YR$04.$ All sales are subject to a $5\%$ sales tax. The yearend for Best Buy is December $31$st and the

company records adjusting journal entries once each year at yearend.

$5.$ The Best Buy Income Statement for the year ended December $31,$ YR$01$ should report what amount of revenue related to the

sale to Mr$.$ Smith $($rounded to the nearest dollar$)?$

a$.$ $$500$ b$.$ $$525$ c$.$ $$560$ d$.$ $$588$ e$.$ None of the answers provided are correct.

$6.$ At December $31,$ YR$01,$ Best Buy estimates that future expenditures to honor warranty claims on the sale to Mr$.$ Smith will

be: $(1)$ assurance warranty $=$ $$25$ and $(2)$ extended $($service$-$type$)$ warranty $=$ $$10.$ In addition, the December $31,$ YR$01$ general

ledger balance in the Warranty Liability account before adjustment is $$15$ dr$.$ What is the correct yearend adjusting journal

entry for the Warranty Liability account?

a$.$ Deferred Warranty Expense $20$

Warranty Liability $20$

b$.$ Warranty Expense $20$

Warranty Liability $20$

c$.$ Deferred Warranty Expense $40$

Warranty Liability $40$

d$.$ Warranty Expense $40$

Warranty Liability $40$

e$.$ None of the answers provided are correct.