Exercise $9-7$A $($Static$)$ 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 $$2,650.$ During this period, a customer returned a product that cost $$1,830$ to repair.

Required

a$.$ Show the effects of these transactions on the financial statements using a horizontal statements model. Indicate whether the event increases, decreases, or increases and decreases each element of the financial statements. In the Statement of Cash Flows column, designate the cash flows as operating activities $($OA$),$ investing activities $($IA$),$ or financing activities $($FA$).$

b$.$ and c$.$ Prepare the journal entries to record the warranty expense for the period and payment for the actual repair costs.