American Business Services Introduced a New Machine on January 1

Multiple Choice

American Business Services introduced a new machine on January 1, 2016. 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: Actual Warranty If American Business Services considers these warranties to be assurance-type and accounts for them by accruing the expense and the related liability) in the year of the sale, what amount relating to warranties should be reflected on the December 31, 2017, balance sheet?

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