TNT Construction had cash sales for the month of June totaling $44,000. TNT offers a 1-year warranty on its construction services. If TNT estimates warranty claims will equal 5% of sales, the journal entry to record the estimated warranty expense for the month is:

Question

Quizplus · Accepted Answer

The journal entry to record the estimated warranty expense for the month is to debit Warranty expense for $2,200 and credit Estimated warranty payable for $2,200. This is because the estimated warranty expense is an expense item, which should be debited, and the amount of the estimated warranty payable is a liability to the company, which should be credited. Options A and D are incorrect because they do not record the estimated liability. Option B is incorrect because it credits the Warranty expense account, which is not appropriate as this is an expense account.

TNT Construction Had Cash Sales for the Month of June