During August, Boxer Company sells $354,000 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 $11,600 before adjustment. Customers returned merchandise for warranty repairs during the month that used $8200 in parts for repairs. The entry to record the estimated warranty expense for the month is:
A. Debit Estimated Warranty Liability $17,700; credit Warranty Expense $17,700.
B. Debit Warranty Expense $6100; credit Estimated Warranty Liability $6100.
C. Debit Warranty Expense $14,300; credit Estimated Warranty Liability $14,300.
D. Debit Estimated Warranty Liability $8200; credit Warranty Expense $8200.
E. Debit Warranty Expense $17,700; credit Estimated Warranty Liability $17,700.
Answer: E
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