Fast Bikes Company offers warranties on all their bikes.They estimate warranty expense at 3.5% of sales.At the beginning of 2018,the Estimated Warranty Payable account had a credit balance of $1900.During the year,Fast Bikes had $296,000 in sales and had to pay out $5900 in warranty payments.At the end of the year,what is the ending balance in the Estimated Warranty Payable accounts?

Question

Quizplus · Accepted Answer

The correct answer is A.The estimated warranty expense is 3.5% of sales, which is $296,000 * 3.5% = $10,360. The beginning balance of the Estimated Warranty Payable account is $1,900. The warranty payments made during the year are $5,900. The ending balance of the Estimated Warranty Payable account is $1,900 + $10,360 - $5,900 = $6,360.

Fast Bikes Company Offers Warranties on All Their Bikes