Volt Electronics Sells Equipment That Includes a Three-Year Warranty

Multiple Choice

Volt Electronics sells equipment that includes a three-year warranty. Repairs under the warranty are performed by an independent service company under contract with Volt. Based on prior experience, warranty costs are estimated to be $25 per item sold. Volt should recognize these warranty costs:

A) When the equipment is sold.
B) When the repairs are performed.
C) When payments are made to the service firm.
D) Evenly over the life of the warranty.