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Question - Uncle Bob's Car Sales provides a one-year labour and parts warranty with every car solD. It is expected that 1500 cars will be sold during the year. Past records show that about 6% of cars require warranty repairs at an average cost of $300 per car. What is the accounting entry to record the expected warranty expense for the year?
a. DR Provision for warranties $27 000; CR Warranty expense $27 000
b. DR Warranty expense $27 000; CR Provision for warranties $27 000
c. DR Provision for warranties $27 000; CR Bank $27 000
d. No entry is required
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