During August, Boxer Company sells $363,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 4% of the selling price. The warranty liability account has a credit balance of $13,500 before adjustment. Customers returned merchandise for warranty repairs during the month that used $10,100 in parts for repairs. The entry to record the customer warranty repairs is:
A. Debit Warranty Expense $14,520; credit Estimated Warranty Liability $14,520.
B. Debit Estimated Warranty Liability $14,520; credit Parts Inventory $14,520.
C. Debit Warranty Expense $10,100; credit Estimated Warranty Liability $10,100.
D. Debit Warranty Expense $11,120; credit Estimated Warranty Liability $11,120.
E. Debit Estimated Warranty Liability $10,100; credit Parts Inventory $10,100.
Answer: E
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