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

question 166

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) Debit Estimated Warranty Liability $7,400; credit Warranty Expense $7,400
• B) Debit Warranty Expense $7,400; credit Sales $7,400.
• C) Debit Warranty Expense $7,400; credit Estimated Warranty Liability $7,400.
• D) Debit Estimated Warranty Liability $7,400; credit Cash $7,400.
• E) No entry is recorded until the items are returned for warranty repairs.

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Definitions:

Basic Research

An exploratory type of scientific inquiry that aims to increase understanding or knowledge without immediate practical application in mind.

Applied Research

It is a form of systematic inquiry involving the practical application of science. It is used for solving problems and inventing new processes and products.

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The measure of how effectively economic resources are used to produce goods and services.

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The immediate benefits or rewards derived from a particular action or decision.