Tyler Company paid $1,500 cash to replace a wheel on equipment sold under warranty. The entry to record the payment would be to:

Question

Quizplus · Accepted Answer

The payment made by Tyler Company is for replacing a wheel on the equipment sold under warranty, so it should be recorded as a payment against the warranty payable account. Therefore, the entry to record the payment should be to debit warranty payable and credit cash. Option A is incorrect because a warranty expense has not been incurred, and Option B is incorrect because equipment expense is not affected by the replacement of a wheel under warranty. Option D is incorrect because there is no parts expense involved in this transaction.

Tyler Company Paid $1,500 Cash to Replace a Wheel on Equipment