Answer:
Debit to product warranty expense
Explanation:
As the company sold the product in the month of may and also include the 36 month warranty. The journal entry would be:
Cash A/c................................................Dr $ 160,000
Product warranty expense A/c.........Dr $11,200
To Sales A/c..................................Cr $171,200
As made a sale so cash is received therefore cash account is debited, along with sale offer product warranty and that will also be debited. It is against a sale of product. Hence, sale account is credited.
Working Note:
product warranty expense = Amount × 7%
= $160,000 × 7%
= $11,200
