During December, Vixen Company sells $859,000 in merchandise that has a one-year warranty. Warranty expense is estimated at 3% of sales. On January 5 of the following year, the merchandise requires repairs that are completed the same day. The repairs cost $14,900 for materials taken from parts inventory. The entry to record the estimated warranty liability at the end of December is:

Multiple Choice

Debit Estimated Warranty Liability $10,870; credit Warranty Expense $10,870.

Debit Estimated Warranty Liability $14,900; credit Warranty Expense $14,900.

Debit Warranty Expense $25,770; credit Estimated Warranty Liability $25,770.

Debit Warranty Expense $14,900; credit Estimated Warranty Liability $14,900.

Debit Warranty Expense $10,870; credit Estimated Warranty Liability $10,870.