A Company Estimates That Warranty Expense Will Be 4% of Sales

Multiple Choice

A company estimates that warranty expense will be 4% of sales. The company's sales for the current period are $185,000. The current period's entry to record the warranty expense is:

A) Debit Warranty Expense $7,400; credit Sales $7,400.
B) Debit Warranty Expense $7,400; credit Estimated Warranty Liability $7,400.
C) Debit Estimated Warranty Liability $7,400; credit Warranty Expense $7,400.
D) Debit Estimated Warranty Liability $7,400; credit Cash $7,400.
E) No entry is recorded until the items are returned for warranty repairs.