During August, Boxer Company sells $355,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 3% of the selling price. The warranty liability account has a credit balance of $12,700 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9300 in parts for repairs. The entry to record the customer warranty repairs is:
A. Debit Warranty Expense $9300; credit Estimated Warranty Liability $9300.
B. Debit Warranty Expense $10,650; credit Estimated Warranty Liability $10,650.
C. Debit Estimated Warranty Liability $9300; credit Parts Inventory $9300.
D. Debit Warranty Expense $7250; credit Estimated Warranty Liability $7250.
E. Debit Estimated Warranty Liability $10,650; credit Parts Inventory $10,650.
Answer: C
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