Vargas Company Sold Goods with a Selling Price of $50,000 $$\begin{array} { | c | l | l | } \hline \text { Estimated Warranty Payable } & 1500 & \\\hline \text { Cash } & & 1500 \\\hline\end{array}$$

question 112

Multiple Choice

Vargas Company sold goods with a selling price of $50,000 in 2019 and estimated 5% warranty expense for the year.Customers complained of defects,and goods with a cost of $1500 had to be replaced.Which of the following is the correct journal entry for honoring the warranties with goods?

• A) \[\begin{array} { | c | l | l | }
• \hline \text { Estimated Warranty Payable } & 1500 & \\
• \hline \text { Cash } & & 1500 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | l | l | }
• \hline \text { Estimated Warranty Payable } & 1500 & \\
• \hline \text { Merchandise Inventory } & & 1500 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | l | l | }
• \hline \text { Warranty Expense } & 1500 & \\
• \hline \text { Merchandise Inventory } & & 1500 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | l | l | }
• \hline \text { Estimated Warranty Payable } & 1500 & \\
• \hline \text { Warranty Expense } & & 1500 \\
• \hline
• \end{array}\]

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