'No Rust' Car Sales Provides a One-Year Labour and Parts

question 35

Multiple Choice

'No Rust' car sales provides a one-year labour and parts warranty with every car sold. It is expected that 1000 cars will be sold for the year. Past records show that about 8% of cars require warranty repairs at an average cost of $200 per car. What is the accounting entry to record the expected warranty expense for the year?

• A) Debit warranty expense $16 000; credit provision for warranties $16 000
• B) Debit provision for warranties $16 000; credit bank $16 000
• C) Debit provision for warranties $16 000; credit warranty expense $16 000
• D) No entry is required

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Definitions:

Body Mass Index

A numerical value derived from a person’s weight and height, used to classify underweight, normal weight, overweight, and obesity.

BMI

Body Mass Index, a measure calculated from a person's weight and height, used to classify underweight, normal weight, overweight, or obesity.

Celsius

A scale for temperature in which 0 degrees represents the freezing point of water and 100 degrees its boiling point at sea level.

Fahrenheit

A temperature scale in which water freezes at 32 degrees and boils at 212 degrees under standard atmospheric conditions.