Petula's Business Sells Heat Pumps Which Have a One-Year Warranty

Essay

Petula's business sells heat pumps which have a one-year warranty.Based on historical data,the warranty costs amount to 11% of sales.During 2015,heat pump sales are $400,000.Actual warranty expenses paid in 2015 are $40,000.
a.​
Determine the amount of the warranty expense deduction for 2015 if Petula's business uses the accrual method.
b.​
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How would your answer change if Petula used the cash method for extended warranties and the purchasers paid $25,000 for the warranties which covered the second and third years of ownership?