Bike World offers warranties on all their bikes.They estimate warranty expense at 5% of sales.At the beginning of 2016,the Estimated warranty payable account had a credit balance of $1700.During the year,Bike World had $301,000 of sales,and had to pay out $6000 in warranty payments.At the end of the year,what is the closing balance in the Estimated warranty payable accounts?

Question

Quizplus · Accepted Answer

Warranty expense = 5% of sales = 0.05 * 301,000 = 15,050Closing balance = Beginning balance + Warranty expense - Warranty payments= 1700 + 15,050 - 6000= 10,750

Bike World Offers Warranties on All Their Bikes