'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. It is expected that 1000 cars will be sold for the year. Past records show that about 8% of cars require warranty repairs at an average cost of $200 per car. What is the accounting entry to record the expected warranty expense for the year?

A) Debit warranty expense $16 000; credit provision for warranties $16 000
B) Debit provision for warranties $16 000; credit bank $16 000
C) Debit provision for warranties $16 000; credit warranty expense $16 000
D) No entry is required