A company estimates that warranty expense will be 2% of sales. The company's sales for the current period are $221,000. The current period's entry to record the warranty expense is:

Debit Estimated Warranty Liability $4,420; credit Warranty Expense $4,420.

Debit Warranty Expense $4,420; credit Sales $4,420.

Debit Estimated Warranty Liability $4,420;credit Cash $4,420.

Debit Warranty Expense $4,420; credit Estimated Warranty Liability $4,420.

No entry is recorded until the items are returned for warranty repairs.