White Hat Digital, Inc. starts the year with a credit balance of $3,400 in its Estimated Warranty Payable account. During the year, there were $225,000 in sales and $$5,400 in warranty repair payments. White Hat 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.$2,500

B.$4,500

C.$3,400

D.$5,400

Question

Business

Paloma Burch

12 March, 22:07

White Hat Digital, Inc. starts the year with a credit balance of $3,400 in its Estimated Warranty Payable account. During the year, there were $225,000 in sales and $$5,400 in warranty repair payments. White Hat 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.$2,500

B.$4,500

C.$3,400

D.$5,400

+5

Answers (1)

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Reilly Clarke · Answer 1

A.$2,500

Explanation:

Initial balance of Estimated Warranty Payable account = $3,400

(Credit) Estimated warranty expense = $225,000 x 2% = $4,500

(Debit) Actual warranty repair payments = $5,400

Final balance = initial balance + credit - debit

Final balance = $3,400 + $4,500 - $5,400 = $2,500

At the end of the year, the balance in the Estimated Warranty Payable account is $2,500