Question

ABC Company sold 250 machines with a one year warranty contract. It is estimated that 6% of the machines will be defective with an average repair cost of $20 per machine. During the year, the company honored warranty contracts on 8 machines.

1) The number of estimated defective units is: *

20 units

25 units

30 units

None of the above

2) The estimated warranty expense of the year is: *

$250

$300

None of the above

$160

3) The repair cost of the year is: *

$160

$250

$300

4) The adjusting entry to accrue the estimated warranty costs should include: *

Debit Warranty Expense

Debit Warranty Liability

Credit Cash

Credit Repair Parts

None of the above

5) The repair cost entry will include: *

Debit Warranty Expense

Debit Warranty Liability

Credit Cash

Debit Repair Parts

Answer 1