The journal entry a company uses to record the estimated product warranty liability expense is
A) debit Product Warranty Expense; credit Product Warranty Payable
B) debit Product Warranty Payable; credit Cash
C) debit Product Warranty Expense; credit Cash
D) debit Product Warranty Payable; credit Product Warranty Expense

Question

Quizplus · Accepted Answer

The estimated product warranty liability expense is recognized by debiting the Product Warranty Expense account and crediting the Product Warranty Payable account. This is because the company has incurred an expense (the estimated cost of providing warranty services) which needs to be recognized on the income statement, and at the same time, has created a liability (Product Warranty Payable) on the balance sheet indicating the amount that will be paid out in the future to provide warranty services.

The Journal Entry a Company Uses to Record the Estimated