Question

Booker Company reported sales revenue for 2013 of $800,000. The products were sold with a six-month warranty. Members of Booker's management estimate the cost of the warranty will be equal to 3% of sales revenue. Which of the following is included in the entry to record the actual amounts paid out as a result of warranty claims?

- A debit to Estimated warranty payable for the actual amount of payments
- A credit to Estimated warranty payable for $24,000
- A debit to Estimated warranty payable for $24,000
- A debit to Warranty expense for the actual amount of payments

Answer 1

The entry to record actual amounts paid out as a result of warranty claims is a debit to Warranty expense for the actual amount of payments.

Step-by-step explanation:

The correct entry to record the actual amounts paid out as a result of warranty claims is a debit to Warranty expense for the actual amount of payments. The estimated warranty payable is not affected by the actual payments, so it would not be debited or credited for the payments. The estimated warranty payable will be debited or credited based on the estimated cost of the warranty at the end of the accounting period.