All Things Digital Company starts the year with a credit balance of $3500 in its Estimated Warranty Payable account.During the year,there were $224,000 in sales and $4800 in warranty repair payments.All Things Digital estimates warranty expense at 2% of sales.At the end of the year,what is the balance in the Estimated Warranty Payable account?

Question

Quizplus · Accepted Answer

The estimated warranty expense for the year is 2% of $224,000 in sales, which equals $4,480. The beginning balance in the Estimated Warranty Payable account is a $3,500 credit. When you add the estimated warranty expense of $4,480 to the beginning balance, you get a total of $7,980. After paying $4,800 in warranty repairs, the ending balance is a credit of $3,180 ($7,980 - $4,800 = $3,180).

All Things Digital Company Starts the Year with a Credit