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In 2007, Baldo Balloons sold 100 hot air balloons for $4,000 each. The balloons carry...

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Accounting

In 2007, Baldo Balloons sold 100 hot air balloons for $4,000 each. The balloons carry a 5 year warranty for defects. Baldo estimates that repair costs will average 4% of the total selling price. The estimated warranty liability at the beginning of the year was $42,000. $11,000 in claims was actually incurred during the year to honor the warranty. What was the balance in the ending estimated warranty liability at the end of the year? Please explain how you determined your answer.

A. $16,000

B. $47,000

C. $42,000

D. $37,000

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