During June, Vixen Company sells $850,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 3% of the selling price. Customers returned $14,000 of merchandise for warranty replacement during the month. The entry to record the estimated warranty liability at the end of the month is:
A. Debit Estimated Warranty Liability $14,000; credit Warranty Expense $14,000.
B. Debit Warranty Expense $11,500; credit Estimated Warranty Liability $11,500.
C. Debit Warranty Expense $25,500; credit Estimated Warranty Liability $25,500.
D. Debit Warranty Expense $14,000; credit Estimated Warranty Liability $14,000.
E. Debit Estimated Warranty Liability $11,500; credit Warranty Expense $11,500.
Answer: C
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