A Company Estimates That Warranty Expense Will Be 4% of Sales

question 8

Multiple Choice

A company estimates that warranty expense will be 4% of sales. The company's sales for the current period are $185,000. The current period's entry to record the warranty expense is:

• A) \(\begin{array}{|c|c|c|}
• \hline \text { Warranty Expense } & 7,400 & \\
• \hline \text { Sales } & & 7,400 \\
• \hline
• \end{array}\)
• B) \(\begin{array}{|c|c|c|}
• \hline \text { Warranty Expense } & 7,400 & \\
• \hline \text { Estimated Warranty Liability } & & 7,400 \\
• \hline
• \end{array}\)
• C) \(\begin{array}{|c|c|c|}
• \hline \text { Estimated Warranty Liability } & 7,400 & \\
• \hline \text { Estimated Warranty Expense } & & 7,400 \\
• \hline
• \end{array}\)
• D) \(\begin{array}{|c|c|c|}
• \hline \text { Warranty Liability } & 7,400 & \\
• \hline \text { Cash } & & 7,400 \\
• \hline
• \end{array}\)
• E) No entry is recorded until the items are returned for warranty repairs.

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