During the month,Northwest Electric paid $582 to settle warranty claims.Northwest uses an estimated warranty account.The journal entry to record the payment would have been:

Question

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The payment of $582 to settle warranty claims represents a reduction in the estimated warranty liability that was originally recorded. Therefore, the estimated warranty payable account would be credited to reduce the balance, and cash would be debited to reflect the outflow of cash. Option A correctly reflects this entry. Option B would increase the estimated warranty liability instead of decreasing it. Option C has the accounts reversed. Option D would increase the warranty expense instead of decreasing the estimated warranty liability.

During the Month,Northwest Electric Paid $582 to Settle Warranty Claims