Franconia Sales Offers Warranties on All Their Electronic Goods $\begin{array} { | c | r | r | } \hline \text { Estimated warranty payable } & 7,500 & \\\hline \text { Cash } & & 7,500 \\\hline\end{array}$

question 6

Multiple Choice

Franconia Sales offers warranties on all their electronic goods. Warranty expense is estimated at 2% of sales revenue. In 2019, Franconia had $500,000 of sales. In the same year, Franconia paid out $7,500 of warranty payments. Which of the following is the entry needed to record the estimated warranty expense?

• A) \(\begin{array} { | c | r | r | }
• \hline \text { Estimated warranty payable } & 7,500 & \\
• \hline \text { Cash } & & 7,500 \\
• \hline
• \end{array}\)
• B) \(\begin{array} { | c | r | r | }
• \hline \text { Warranty expense } & 7,500 & \\
• \hline \text { Estimated warranty payable } & & 7,500 \\
• \hline
• \end{array}\)
• C) \(\begin{array} { | c | r | r | }
• \hline \text { Warranty expense } & 10,000 & \\
• \hline \text { Estimated warranty payable } & & 10,000 \\
• \hline
• \end{array}\)
• D) \(\begin{array} { | c | r | r | }
• \hline \text { Warranty expense } & 10,000 & \\
• \hline \text { Sales revenue } & & 10,000 \\
• \hline
• \end{array}\)

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