Jaye's Company paid $750 cash to replace a part on equipment sold under warranty. To recognize the payment, which of the following are correct?

Question

Quizplus · Accepted Answer

The payment made to replace a part on equipment sold under warranty should be recognized as Warranty Expense, which is an expense account on the income statement. The entry should be debit Warranty Expense and credit Cash. Choice A is incorrect because Warranty Payable is a liability account and should be credited instead of debited when the expense is recognized. Choices C and D are incorrect because neither Equipment Expense nor Parts Expense are the appropriate accounts to use in this scenario.

Jaye's Company Paid $750 Cash to Replace a Part on Equipment