A company sold $12,000 worth of trampolines 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 trampolines.
A company sold $12,000 worth of trampolines 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 trampolines.
1