'No Rust' Car Sales Provides a One Year Labour and Parts

Multiple Choice

'No Rust' car sales provides a one year labour and parts warranty with every car sold and at the start of 2012 had a provision of $16 000 to cover warranty claims.On 30 March 2012 $2 700 was paid out for repairs for vehicles under warranty.The correct accounting entry to record the payment of the claims is:

A) Debit warranty expense $2 700; credit provision for warranties $2 700
B) Debit provision for warranties $2 700; credit bank $2 700
C) Debit provision for warranties $2 700; credit warranty expense $2 700
D) Debit warranty expense $2 700; credit bank $2 700