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During August, Arena Company sells $355,000 in product that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a balance of $11,700 before adjustment. Customers returned product for warranty repairs during the month that used $8,300 in parts for repairs. The entry to record the estimated warranty expense for the month is:

a) Debit Warranty Expense $17,750; credit Estimated Warranty Liability $17,750.

b) Debit Estimated Warranty Liability $8,300; credit Warranty Expense $8,300.

c) Debit Estimated Warranty Liability $17,750; credit Warranty Expense $17,750.

d) Debit Warranty Expense $14,350; credit Estimated Warranty Liability $14,350.

e) Debit Warranty Expense $6,050; credit Estimated Warranty Liability $6,050.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M939995

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