Research Company Sells Merchandise with a One Year Warranty

Multiple Choice

Research Company sells merchandise with a one year warranty. In 2012, sales consisted of 2,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income statement, Research should show warranty expense of

A) $25,000
B) $7,500
C) $17,500
D) $0