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. At the end of the year, what was the balance in the Estimated Warranty Payable account?
A)$4,200 debit
B)$4,500 credit
C)$2,500 debit
D)$2,200 credit

Question

Quizplus · Accepted Answer

The estimated warranty expense for the year is 2% of $210,000, which is $4,200. Adding this to the beginning balance of $2,500 gives $6,700. After paying $4,500 in warranty repairs, the ending balance is $6,700 - $4,500 = $2,200 credit.

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