During August, Boxer Company sells $358,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $12,600 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9200 in parts for repairs. The entry to record the estimated warranty expense for the month is:
A. Debit Estimated Warranty Liability $17,900; credit Warranty Expense $17,900.
B. Debit Estimated Warranty Liability $9200; credit Warranty Expense $9200.
C. Debit Warranty Expense $14,500; credit Estimated Warranty Liability $14,500.
D. Debit Warranty Expense $5300; credit Estimated Warranty Liability $5300.
E. Debit Warranty Expense $17,900; credit Estimated Warranty Liability $17,900.
Answer: E
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