All Things Digital, Inc

question 167

Multiple Choice

All Things Digital, Inc. starts the year with a credit balance of $3500 in its Estimated Warranty Payable account. During the year, there were $224,000 in sales and $4800 in warranty repair payments. All Things 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) $4480 debit
• B) $4800 credit
• C) $3500 debit
• D) $3180 credit

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Definitions:

Fed

Short for the Federal Reserve System, which is the central banking system of the United States responsible for setting monetary policy.

Federal Reserve

The central banking system of the United States, which regulates the U.S. monetary and financial system.

Clearing of Checks

The process by which banks exchange checks or drafts drawn on each other and settle the differences to facilitate the actual transaction the check represents.

Currency in Circulation

Refers to the physical money, including coins and paper money, that is actively used and exchanged in an economy.