A Company Sold $12,000 Worth of Bicycles with an Extended

Multiple Choice

A company sold $12,000 worth of bicycles with an extended warranty.It estimates that 2% of these sales will result in warranty work.The current period's entry to record the warranty expense is:

A) Debit Warranty Expense $240;credit Cash $240.
B) Debit Prepaid Warranties $240;credit Warranty Expense $240.
C) Debit Estimated Warranty Liability $240;credit Cash $240.
D) Debit Sales Allowances $240;credit Estimated Warranty Liability $240.
E) Debit Warranty Expense $240;credit Estimated Warranty Liability $240.