During August, Boxer Company sells $349,000 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 $12,100 before adjustment. Customers returned merchandise for warranty repairs during the month that used $8,700 in parts for repairs. The entry to record the customer warranty repairs is:

Estimated warranty liability $8,700

       To Party inventory $8,700

(Being the customer warranty repair is recorded)

Explanation:

The journal entry to record the customer warranty repairs is shown below:

Estimated warranty liability $8,700

       To Party inventory $8,700

(Being the customer warranty repair is recorded)

While recording this we debited the estimated  warranty liability as it decreased the liability and also at the same time it decreased the assets due to which the party inventory is credited