Which of the effects in the payment would result

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Problem 1: Buck, Inc. sells inventory to customers with a two year embedded warranty that is not sold separately. During 2020 Buck sold 94,000 units of the products under warranty. Based on past experience Buck expects that 5% of the products will be returned for work that is covered during the 2 years and the average cost to fix these units will be $37 each. During 2021, Buck paid $94,000 total to fix returned units under warranty. This payment would result in which of the following effects in 2021?

1) Cash would increase.

2) Net income would decrease

3) Expenses would increase

4) Current liabilities would decrease

Reference no: EM132795413

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