Mark Sports Inc. sold 500 pairs of skates at $50 each in 2012. The management estimates that 4% of the skates sold will need repair within a year. The repair cost for each pair is $10. Which is the correct journal entry for estimating warranty liability

Warranty repair Expense (Dr.) $200

Warranty Payable (Dr.) $200

Explanation:

The warranty expense is the estimate of probable expense that will incur due to fault in the product. The estimated repair is the 4% of skates sold. If 500 pairs of skates are sold then out of them 4% will require repair. The repair for the faulty skates will cost $10. The total cost will be $200,

500 pairs of skates * 4% * $10

Additional debt could be things such as items that they might need to set up their business. It could also be decorations, electronics, and other objects that they could use to make their business thrive.

Explanation: