White hat digital, inc. starts the year with a credit balance of $3,400 in its estimated warranty payable account. during theyear, 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

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

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