Use the Information Below to Answer the Following Questions:
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question 11

Multiple Choice

Use the information below to answer the following questions:
On 30 June 2012, Video Manufactures Ltd, which uses accrual accounting, estimates that it will incur warranty costs of $24 000 in the next financial year on products sold during the year just ended. On 7 October 2012, the manufacturer pays $3500 under the warranty.
-What is the journal entry made by Video Manufactures Ltd on 7 October 2012?

• A) DR Warranty expense\(\quad\)\(\quad\)CR Warranty liability
• B) DR Warranty liability\(\quad\)\(\quad\) CR Warranty expense
• C) DR Warranty liability\(\quad\)\(\quad\) CR Cash
• D) DR Cash\(\quad\)\(\quad\)\(\quad\)\(\quad\)\(\quad\)\(\quad\) CR Warranty liability