Power Company Sells Merchandise with a One Year Warranty

Multiple Choice

Power Company sells merchandise with a one year warranty. In 2012, sales consisted of 1,600 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, Power should show warranty expense of

A) $4,800
B) $11,200
C) $16,000
D) $0