Question

Jumbo Sales Corporation offers warranties on all their electronic goods. Warranty expense is estimated at 3% of sales revenue. In 2013, the company had $595,000 of sales. In the same year, it paid out $8,500 of warranty payments. Which of the following is the entry needed to record the estimated warranty expense?

		Warranty Expense 17,850 ​ Sales Revenue ​ 17,850
		Warranty Expense 17,850 ​ Estimated Warranty Payable ​ 17,850
		Warranty Expense 8,500 ​ Estimated Warranty Payable ​ 8,500
		Estimated Warranty Payable 8,500 ​ Cash ​ 8,500

Answer 1

Ans.

The following entry is needed to record the estimated warranty expense.

Date	Particulars	Debit	Credit
	Warranty Expense	$ 17,850.00
	Estimated Warranty Payable		$ 17,850.00
	{ Estimated Warranty Expense = $595,000 * 3% = $17,850}

So correct ans is B.