Fail-Safe Computer Inc.sells equipment with a 2-year warranty.Prior experience indicates that costs for warranty repairs average 3% in the first year,and 2% in the second year.Sales were $300,000 and $400,000 in fiscal 2016 and 2017 respectively.It paid $5,000 for materials and labour to make warranty-related repairs in 2016.What amount will be recorded as warranty expense in 2016?
A)$5,000
B)$12,000
C)$15,000
D)$18,000

Question

Quizplus · Accepted Answer

A)$300,000 × 5% = $15,000