During 2011 Alcom Appliances Sold 400 Appliances Worth $2,000,000

Short Answer

During 2011 Alcom Appliances sold 400 appliances worth $2,000,000.Each appliance comes with a one-year warranty, which Alcom estimates will cost $75 each.During the year Alcom spent $12,500 on warranty costs for the appliances sold in 2011.At the end of the 2011 the warranty liability and the warranty expense related to these sales would be closest to: $\begin{array}{lll}&\text { Warranty Liability}&\text { Warranty Expense }\\\hline\text { a. } & \$ 17,500 & \$ 12,500 \\\text { b. } & \$ 17,500 & \$ 30,000 \\\text { c. } & \$ 12,500 & \$ 12,500 \\\text { d. } & \$ 30,000 & \$ 30,000\end{array}$