Question

If a product is repaired under warranty, the seller would record a journal entry that includes a ________.a. debit to Product Warranty Payable. b. credit to Product Warranty Payable. c. debit to Supplies. d. debit to Cash.

Answer 1

Answer: Debit to Product Warranty Payable

Explanation: Product Warranty Payable is a liability account that has a credit balance. To increase a liability a credit is recorded while to reduce a liability a debit is recorded to the liability.

The seller maintains the warranty as a liability and initially records a debit to its product warranty expense and a credit to its product warranty Payable.

When a repair is done on a product under warranty, the seller records a debit to the product warranty Payable to reduce it’s liability.

Also, a debit to either supplies or cash will increase the expense and assets accounts respectively which will amount to incorrect journal entries.