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 customer warranty repairs is:
A)Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800.
B)Debit Warranty Expense $9,400; credit Estimated Warranty Liability $9,400.
C)Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400.
D)Debit Estimated Warranty Liability $9,400; credit Parts Inventory $9,400.
E)Debit Estimated Warranty Liability $17,800; credit Parts Inventory $17,800.

Question

Quizplus · Accepted Answer

The entry to record the actual warranty repairs should debit the Estimated Warranty Liability account and credit the Parts Inventory account for the cost of parts used, which is $9,400.

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