During August, Boxer Company sells $347,000 in merchandise that has a one year w

Question

During August, Boxer Company sells $347,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 4% of the selling price. The warranty liability account has a credit balance of $11,900 before adjustment. Customers returned merchandise for warranty repairs during the month that used $8,500 in parts for repairs. The entry to record the customer warranty repairs is:

Debit Warranty Expense $10,480; credit Estimated Warranty Liability $10,480.

Debit Estimated Warranty Liability $8,500; credit Parts Inventory $8,500.

Debit Estimated Warranty Liability $13,880; credit Parts Inventory $13,880.

Debit Warranty Expense $8,500; credit Estimated Warranty Liability $8,500.

Debit Warranty Expense $13,880; credit Estimated Warranty Liability $13,880.

Explanation / Answer

Debit Estimated Warranty Liability $8,500; credit Parts Inventory $8,500.

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