Marin Company Sells 4,000 Units of Its Product in 2011

Multiple Choice

Marin Company sells 4,000 units of its product in 2011 for $500 each.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 80 units for a total cost of $4,000. What amount will be reported on Marin Company's statement of financial position as Estimated Warranty Liability on December 31, 2011?

A) $4,000.
B) $6,000.
C) $2,000.
D) Cannot be determined.