Pink Pty Ltd. sold $110,000 of cosmetic products during July under a three-month warranty. The cost to repair defects under the warranty is estimated at 2.5% of the sales price. On August 10, a customer required a $100 part replacement plus $40 of labour under the warranty. Journal entry to record estimated warranty expenses will be: Select one: a. Provision for product warranty Dr 2,750 Warranty Expenses Cr 2,750 b. Warranty Expenses Dr 140 Provision for product warranty Cr 140 c. Warranty Expenses Dr 2,750 Provision for product warranty Cr 2,750 d. Provision for product warranty Dr 140 Warranty Expenses Cr 140
Pink Pty Ltd. sold $110,000 of cosmetic products during July under a three-month warranty. The cost to repair defects under the warranty is estimated at 2.5% of the sales price. On August 10, a customer required a $100 part replacement plus $40 of labour under the warranty. Journal entry to record estimated warranty expenses will be: Select one: a. Provision for product warranty Dr 2,750 Warranty Expenses Cr 2,750 b. Warranty Expenses Dr 140 Provision for product warranty Cr 140 c. Warranty Expenses Dr 2,750 Provision for product warranty Cr 2,750 d. Provision for product warranty Dr 140 Warranty Expenses Cr 140
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Pink Pty Ltd. sold $110,000 of cosmetic products during July under a three-month warranty. The cost to repair defects under the warranty is estimated at 2.5% of the sales price. On August 10, a customer required a $100 part replacement plus $40 of labour under the warranty. Journal entry to record estimated warranty expenses will be:
Select one:
a. Provision for product warranty Dr 2,750
Warranty Expenses Cr 2,750
b. Warranty Expenses Dr 140
Provision for product warranty Cr 140
c. Warranty Expenses Dr 2,750
Provision for product warranty Cr 2,750
d. Provision for product warranty Dr 140
Warranty Expenses Cr 140
Expert Solution
Step 1
Estimated warranty expenses = $110,000 x 2 5% = $2,750
$140 is not estimated warranty expense, it is claimed warranty.
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