A company estimates that warranty expense will be 4% of sales. The company's sales for the current period are $185,000. The current period's entry to record the warranty expense is:
A. Debit Estimated Warranty Liability $7,400; credit Warranty Expense $7,400.
B. Debit Warranty Expense $7,400; credit Estimated Warranty Liability $7,400.
C. Debit Estimated Warranty Liability $7,400; credit Cash $7,400.
D. Debit Warranty Expense $7,400; credit Sales $7,400.
E. No entry is recorded until the items are returned for warranty repairs.
Answer: B
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