Electronics4U Manufactures High-End Whole Home Electronic Systems

Multiple Choice

Electronics4U manufactures high-end whole home electronic systems.The company provides a one-year warranty for all products sold.The company estimates that the warranty cost is $200 per unit sold and reported a liability for estimated warranty costs $6.5 million at the beginning of this year.If during the current year, the company sold 50,000 units for a total of $243 million and paid warranty claims of $7,500,000 on current and prior year sales, what amount of liability would the company report on its statement of financial position at the end of the current year?

A) $2,500,000.
B) $3,500,000.
C) $9,000,000.
D) $10,000,000.