During August, Boxer Company sells $356,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $12,800 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs.
-The entry to record the customer warranty repairs is:

Question

During August, Boxer Company sells $356,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $12,800 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs. 
-The entry to record the customer warranty repairs is:

Quizplus · Accepted Answer

The entry to record the customer warranty repairs is to debit the Estimated Warranty Liability for the amount of the repairs, which is $9,400, and credit the Parts Inventory for the same amount. This is because the parts used for the repairs are no longer in inventory and have been used for the warranty repairs. The other options involve recording the entire warranty expense or a portion of it, which is not necessary at this point. The credit balance in the Warranty Liability account before adjustment relates to the estimated liability of all outstanding warranties, not just the ones used in August.

During August, Boxer Company Sells $356,000 in Merchandise That Has