During August, Boxer Company sells $356,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price.
The warranty liability account has a credit balance of $12,800 before adjustment.
Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs.
The entry to record the customer warranty repairs is:
1. Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800.
2. Debit Warranty Expense $9,400; credit Estimated Warranty Liability $9,400.
3. Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400.
4. Debit Estimated Warranty Liability $9,400; credit Parts Inventory $9,400.
5. Debit Estimated Warranty Liability $17,800; credit Parts Inventory $17,800.