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 137

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 estimated warranty expense?

• 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) \[\begin{array} { | c | r | r | }
• \hline \text { Warranty expense } & 10,000 & \\
• \hline \text { Sales revenue } & & 10,000 \\
• \hline
• \end{array}\]

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Definitions:

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing a measure of consumer benefit.

Walmart

An American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount that they actually do pay.

Equilibrium

The condition where supply and demand in the market are equal, leading to stable prices.