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USE THE FOLLOWING INFORMATION FOR QUESTION #6: VMR Company offers a basic manufacturer guarantee of satisfaction for any cars it sells for the first three
USE THE FOLLOWING INFORMATION FOR QUESTION #6: VMR Company offers a basic manufacturer guarantee of satisfaction for any cars it sells for the first three years of the vehicle's life against defects. Estimates based on industry experience indicate warranty costs being incurred according to the below details: 5% 6% Warranty Costs as a % of Sales in first 12 months following the sale Warranty Costs as a % of Sales in second 12 months following the sale Warranty Costs as a % of Sales in third 12 months following the sale Amount of Sales made in Year 20X1 Assume COGS associated with these sales totaled, and we use perpetual inventory system $ $ 8% 1,000,000 350,000 6. What is the journal entry to accrue for warranty expenses as of 12/31/20X1? A. Debit Warranty Expense for $850,000, and Credit Warranty Liability for $850,000 B. Debit Warranty Expense for $60,000, and Credit Warranty Liability for $60,000 C. Debit Warranty Expense for $140,000, and Credit Warranty Liability for $140,000 D. Debit Warranty Expense for $190,000, and Credit Warranty Liability for $190,000
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