Tractor World Offers Warranties on All Their Tractors

question 113

Multiple Choice

Tractor World offers warranties on all their tractors.They estimate warranty expense at 2.4% of sales.At the beginning of 2013,the Estimated warranty payable account had a credit balance of $900.During the year,Tractor World had $285,000 of sales,and had to pay out $5,100 in warranty payments.
-At the end of the year,what balance in Estimated warranty payable would be included in the balance sheet?

• A) $2,640
• B) $5,100
• C) $4,200
• D) $6,840

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Definitions:

Monthly Demand

The total quantity of a product or service that consumers are willing and able to purchase in a month.

Selling Price

The amount a buyer pays to purchase a product, determined by cost, market demand, and competition.

Direct Materials

Raw materials that are directly traced and integral to the finished product.

Direct Labour

The labor costs directly associated with the manufacture of specific goods or services.