Question

Cycle Sales Company offers warranties on all their bikes. They estimate warranty expense at 4.5​% of sales. At the beginning of​ 2019, the Estimated Warranty Payable account had a credit balance of $ 1 comma 800. During the​ year, Cycle Sales had $ 296 comma 000 in sales and had to pay out $ 5 comma 400 in warranty payments. How much Warranty Expense will be reported on the 2019 income​ statement?

Answer 1

$13,320

Step-by-step explanation:

The computation of the warranty expenditure is shown below:

= Sales revenues × estimated warranty expenditure percentage

= $296,000 × 4.5%

= $13,320

By multiplying the sales revenues with the estimated warranty expenditure percentage we can get the warranty expense and the same is shown above

All other information which is given is not relevant. Hence, ignored it