Which of the following is included in the entry to record estimated warranty payable?
A) a credit to Estimated Warranty Payable
B) a credit to Merchandise Inventory
C) a credit to Warranty Expense
D) a debit to Estimated Warranty Payable

Question

Quizplus · Accepted Answer

When a company sells a product with a warranty, it needs to estimate the potential warranty claims that may occur in the future. This is recorded through an adjusting entry at the end of the period. To record the estimated warranty payable, the company would credit Estimated Warranty Payable, which represents the liability for potential warranty claims. There would not be a credit to Merchandise Inventory since this account pertains to the cost of goods sold, and there would not be a debit to Estimated Warranty Payable, as this would increase the liability beyond the estimated amount. A credit to Warranty Expense would be recorded when actual warranty claims are made and paid out by the company.

Which of the Following Is Included in the Entry to Record