Albert Corp

Multiple Choice

Albert Corp. introduced a new machine on January 1, 2016. The machine carried a two-year assurance-type 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 the company uses the GAAP approach of accruing warranty expense and the related liability) in the year of the sale, what amount relating to warranty expense should be reflected on the December 31, 2017 income statement?

A) $2,200
B) $4,800
C) $5,200
D) $7,400