A Company Sold $12,000 Worth of Bicycles with an Extended

Multiple Choice

A company sold $12,000 worth of bicycles with an extended warranty.It estimates that 2% of these sales will result in warranty work.The company should:

A) Consider the warranty expense a remote liability since the rate is only 2%.
B) Recognize warranty expense at the time the warranty work is performed.
C) Recognize warranty expense and liability in the year of the sale.
D) Consider the warranty expense a contingent liability.
E) Recognize warranty liability when the company purchases the bicycles.