Consolidated Business Services Introduced a New Machine on January 1

Multiple Choice

Consolidated Business Services introduced a new machine on January 1, 2010.The machine carried a two-year warranty against defects.The estimated warranty costs related to dollar sales were 3% in the year of sale and 5% in the year after sale.Additional information follows: $\begin{array}{rrr}&&\text { Actual Werranty }\\ \text { Year } & \text { Sales } & \text { Expenditures }\\2010 & \$ 50,000 & \$ 900 \\2011 & 80,000 & 4,200\end{array}$ If the expense warranty accrual method is used, what amount relating to warranties should be reflected on the December 31, 2011, balance sheet?

A) $5, 300
B) $6, 400
C) $6, 500
D) $9, 100