Tractor World Offers Warranties on All Their Tractors

question 110

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,how much Warranty expense was reported on the income statement?

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

---

Definitions:

Incremental Sales

Incremental sales refer to the additional sales revenue gained from a particular sales activity or decision, beyond what would have been achieved otherwise.

Operating Expenses

Costs associated with the day-to-day operations of a business that are not directly tied to the production of goods or services.

Income Tax Rate

The proportion of a person's or organization's income that is owed to the government in taxes.

Capital Budgeting

The process of planning and evaluating investments in long-term assets to generate returns over time.