A company sold $12,000 worth of trampolines with an extended warranty. It estima

Question

A company sold $12,000 worth of trampolines with an extended warranty. It estimates that 2% of these sales will result in warranty work. The company should:
A. Consider the warranty expense a remote liability since the rate is only 2%
B. Recognize warranty expense at the time the warranty work is performed
C. Recognize warranty expense and liability in the year of the sale
D. Consider the warranty expense a contingent liability
E. Recognize warranty liability when the company purchases the trampolines

Explanation / Answer

It would be: C

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