45.9k views
4 votes
Monthly sales are $530,000. Warranty costs are estimated at 3% of monthly sales, warranties are honored with replacement products. No defective products are returned during the month. At the end of the month, the company should record a journal entry with a credit to:

A. Sales for $15,900.
B. Warranty Expense for $15,900.
C. Estimated Warranty Payable for $15,900.
D. Inventory for $15,900.

User Loyda
by
7.3k points

1 Answer

5 votes

Answer:

C. Estimated Warranty Payable for $15,900.

Step-by-step explanation:

The journal entry to record the warranty expense is shown below:

Warranty expense A/c Dr $15,900

To Estimated Warranty Payable/ Liability A/c $15,900

(Being warranty expense is recorded)

The computation is shown below:

= Monthly sales × warranty estimated percentage

= $530,000 × 3%

= $15,900

It can be estimated warranty payable or estimated warranty liability

User MaM
by
7.9k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.