Brockville Mechanics Pty Ltd offers a 12-month guarantee with all car repairs and service. On 1 July 2019, the balance of the warranty provision account was $2,400. During the year ended 30 June 2020, warranty claims cost $3,000 of which $1,000 was for parts and $2,000 for labour.

During the same year, revenue from car repairs was $280,000, an increase of more than 20% on the previous year. Management estimated that the liability for unexpired warranty contracts as at 30 June 2020 was $2,400. There have been no changes in suppliers, product quality, or price.

Disregard GST for this question.

Required:

Prepare the journal entry to record the warranty claims during the year ended 30 June 2020.

Group of answer choices

DR: Provision for warranty $3,000, CR: Inventory Parts $1,000 and CR: Wages payable $2,000

DR: Inventory Parts 1,000 and DR: Wages payable $2,000, CR: Provision for warranty $3,000

DR: Warranty expense $3,000, CR: CR: Inventory Parts $1,000 and CR: Wages payable $2,000

DR: Inventory Parts 1,000 and DR: Wages payable $2,000, CR: Warranty expense $3,000