Question

During the month, TNT Construction paid $300 to settle warranty claims. TNT uses an estimated warranty account. The journal entry to record the claims payment would have been:

A. debit Estimated warranty payable, $300; credit Cash, $300.

B. debit Warranty expense, $300; credit Cash, $300.

C. debit Estimated warranty payable, $300; credit Warranty expense, $300.

D. debit Warranty expense, $300; credit Estimated warranty payable, $300.

Answer 1

The journal entry to record the claims payment would have been: debit Estimated warranty payable, $300; credit Cash, $300.

Step-by-step explanation:

The journal entry to record the claims payment would have been: A. debit Estimated warranty payable, $300; credit Cash, $300.

TNT Construction paid $300 to settle warranty claims during the month. Whenever a company pays for warranty claims, it reduces its estimated warranty payable and records the payment as an expense in its books. In this case, the estimated warranty payable account is debited to decrease the amount owed, and the cash account is credited to show the outgoing payment.

This entry ensures that the financial records accurately reflect the payment for warranty claims settled by TNT Construction.