During August, Boxer Company sells $358,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 3% of the selling price. The warranty liability account has a credit balance of $13,000 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,600 in parts for repairs. The entry to record the customer warranty repairs is:

• Debit Warranty Expense $7,340; credit Estimated Warranty Liability $7,340.

• Debit Estimated Warranty Liability $10,740; credit Parts Inventory $10,740.

• Debit Warranty Expense $10,740; credit Estimated Warranty Liability $10,740.

• Debit Estimated Warranty Liability $9,600; credit Parts Inventory $9,600.

• Debit Warranty Expense $9,600; credit Estimated Warranty Liability $9,600.