Saran Digital Inc.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.Saran Digital estimates warranty expense at 2% of sales.At the end of the year,what is 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.