LulzbotCom Sells 6000 Units of Its Product for $500 Each

Multiple Choice

Lulzbot.com sells 6000 units of its product for $500 each during the year ending December 31 2017. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale warranty contracts are honored on 120 units for a total cost of $6000. What amount will be reported on Lulzbot.com's balance sheet as Warranty Liability on December 31 2017?

A) $6000
B) $9000
C) $3000
D) It cannot be determined.