Talk Unlimited Began Business on January 1,2003 $\begin{array} { l l l } \text { Prepaid Waranty } & 17,600 & \\\text { Liability for Warranties } & & 17,000 \\\end{array}$

Multiple Choice

Talk Unlimited began business on January 1,2003.The company manufactures and sells cell phones cases.The company provides a warranty on its units,whereby the company will replace any defective case for two years after the sale,at no additional cost to the customer.During 2003,Talk Unlimited had sales of $850,000.The company estimates that the cost of the warranties will be 2% of sales.No warranty claims were made in 2003.During 2004,warranty claims of $15,700 were made.All warranty claims were satisfied and paid for.What journal entry,if any,is necessary for 2003 by Talk Unlimited?

A) No journal entry is necessary.


B) $\begin{array} { l l l } \text { Prepaid Waranty } & 17,600 & \\\text { Liability for Warranties } & & 17,000 \\\end{array}$

C) $\begin{array}{lccc}\text { Warranty Expense } & 17,000 & \\\text { Liability for Warranties } & & 17,000 \\\end{array}$

D) $\begin{array}{lccc}\text { Warranty Expense } & 17,000 & \\\text { Warranty Sales } & & 17,000 \\\end{array}$

E) $\begin{array}{lccc}\text { Waranty Expense } & 17,000 & \\\text { Unearned Warranties } & & 17,000\end{array}$