Cycle Haven,Inc

question 2

Multiple Choice

Cycle Haven,Inc.offers warranties on all their bikes.They estimate warranty expense at 4.5% of sales.At the beginning of 2017,the Estimated Warranty Payable account had a credit balance of $2,200.During the year,Cycle Haven had $305,000 in sales and had to pay out $6,000 in warranty payments.How much Warranty Expense will be reported on the 2017 income statement?

• A)$9,925
• B)$8,200
• C)$11,525
• D)$13,725

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Definitions:

Capital Budgeting

The process by which a business evaluates and selects long-term investments that are worth more than their cost to achieve strategic goals.

Cash Flows

The total amount of money being transferred into and out of a business, which affects the company's liquidity.

Initial Cost

The upfront expenditure related to acquiring or starting a new project or investment, not including ongoing or future costs.

Risk Level

A measure of the uncertainty associated with achieving return objectives within investing, often determined by the volatility in asset prices and market fluctuations.