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

question 20

Multiple Choice

Franconia Sales offers warranties on all their electronic goods.Warranty expense is estimated at 2% of sales revenue.In 2013,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 disbursement of warranty payments?

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

Learn the basics of activity-based costing and its impact on relevant costing.

Comprehend the decision-making process concerning asset replacement before cost recovery.

Understand the concept of joint costs and the split-off point in the production of joint products.

Recognize the significance of capacity utilization and its impact on decision-making in special order situations.

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