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.

Use the above information to compute the below:

1) The number of estimated defective units is: *

a) 20 units

b) 25 units

c) 30 units

d) None of the above

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

a) $300

b) None of the above

c) $160

d) $250

3) The repair cost of the year is: *

a) $160

b) $250

c) $300

d) None of the above

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

a) Debit Warranty Expense

b) Debit Warranty Liability

c) Credit Cash

d) Credit Repair Parts

5) The repair cost entry will include: *

a) Debit Warranty Expense

b) Debit Warranty Liability

c) Credit Cash

d) Debit Repair Parts