Piano Man Co. sells pianos for $1,500 each. Using past experience, Piano Man Co. estimates that 0.60% of units sold will be returned and require replacement at an average cost of $500 per unit. In 2022, the company sold 1,000 pianos. The actual number of units replaced was 3 in 2023 and was paid in cash.

Question: Pick the choice that would best represent the journal entry to recognize the warranty replacements in 2023.

a. Debit Warranty payable, Credit Warranty expense - 1,500

b. Debit Warranty payable, Credit Warranty expense - 3,000

c. Debit Warranty payable, Credit Cash - 1,500

d. Debit Warranty expense, Credit Inventory - 1,500