Monthly sales are $530,000. warranty costs are estimated at 3% of monthly sales, warranties are honored with replacement products. no defective products are returned during the month. at the end of the month, the company should record a journal entry with a credit to:
a. sales for $15,900.
b. warranty expense for $15,900.
c. estimated warranty payable for $15,900.
d. inventory for $15,900.

C. Estimated Warranty Payable for $15,900.

Explanation:

The journal entry to record the warranty expense is shown below:

Warranty expense A/c Dr $15,900

       To Estimated Warranty Payable/ Liability A/c  $15,900

(Being warranty expense is recorded)

The computation is shown below:

=  Monthly sales × warranty estimated percentage

=  $530,000 × 3%

=  $15,900

It can be estimated warranty payable or estimated warranty liability

explanation: doctrine of respondeat superior is a legal doctrine that is commonly used in tort. this principle makes an employer or principal legally responsible for the wrongful acts done by an employee or agent, if such acts occur within the scope of the employment or agency.