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 $1,800 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs. The entry to record the estimated warranty expense for the month is:
A)Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800.
B)Debit Warranty Expense $5,000; credit Estimated Warranty Liability $5,000.
C)Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400.
D)Debit Estimated Warranty Liability $9,400; credit Warranty Expense $9,400.
E)Debit Estimated Warranty Liability $17,800; credit Warranty Expense $17,800.

Question

Quizplus · Accepted Answer

The estimated warranty expense is 5% of the selling price, which is $356,000 x 5% = $17,800. The entry to record the estimated warranty expense is: Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800.

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