Question

Scout Company sold $15.000 of merchandise in September with a three-month warranty. The cost to repair defects under warranty is estimated at 5% of the sales price. The journal entry to record the estimated warranty expense for the month of September will include a

a. debit to Product Warranty Expense for $750
b. credit to Product Warranty Expense for $750.
c. debit to Product Warranty Payable for $7,500.
d. credit to Product Warranty Payable for $7.500.

Answer 1

Answer: debit to Product Warranty Expense for $750

Explanation: 5% of $15000 =

5 ÷ 100 × $15000 is $750.

This is an expense and so will be a debit.