Monthly sales are $530,000. warranty costs are estimated at 3% of monthly sales, warranties are honored with replacement products. no defective products are returned during the month. at the end of the month, the company should record a journal entry with a credit to:
a. sales for $15,900.
b. warranty expense for $15,900.
c. estimated warranty payable for $15,900.
d. inventory for $15,900.

C. Estimated Warranty Payable for $15,900.

Explanation:

The journal entry to record the warranty expense is shown below:

Warranty expense A/c Dr $15,900

       To Estimated Warranty Payable/ Liability A/c  $15,900

(Being warranty expense is recorded)

The computation is shown below:

=  Monthly sales × warranty estimated percentage

=  $530,000 × 3%

=  $15,900

It can be estimated warranty payable or estimated warranty liability

c

explanation:

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