During june, vixen company sells $850,000 in merchandise that has a one year warranty. experience shows that warranty expenses average about 3% of the selling price. customers returned $14,000 of merchandise for warranty replacement during the month. the entry to record the estimated warranty provision at the end of the month is:
a) debit warranty expense $11,500; credit estimated warranty liability $11,500.
b) debit warranty expense $14,000; credit estimated warranty liability $14,000.
c) debit warranty expense $25,500; credit estimated warranty liability $25,500.
d) debit estimated warranty liability $14,000; credit warranty expense $14,000.
e) debit estimated warranty liability $11,500; credit warranty expense $11,500.

C) Debit Warranty Expense $25,500; credit Estimated Warranty Liability $25,500.

Explanation:

Warranty expense is the cost that business expects to incur or has already spent for the goods sold and correspondingly provision is recognized on liability side. The Warranty estimates comes out to be $25,500 (i.e. 3% of the $850,000). The Vixen company will recognize as estimate of $25,500 as Warranty Expense and corresponding amount as an estimate of Warranty Liability.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.