Sara Digital starts the year with $2,500 in its Estimated Warranty Payable account. During the year, there were $210,000 of sales and $4,500 of warranty repair payments. Sara Digital estimates warranty expense at 2% of sales. The journal entry to record this will include a debit to Warranty Expense for:
A)$4,200
B)$4,500
C)$2,500
D)$2,200

Question

Quizplus · Accepted Answer

The warranty expense is estimated at 2% of sales, which would be $4,200 (2% of $210,000). Since the estimated warranty payable at the beginning of the year was already recorded, the only thing left to record in the journal entry is the warranty expense. Therefore, the journal entry would include a debit to Warranty Expense for $4,200.

Sara Digital Starts the Year with $2,500 in Its Estimated