Western Company Sells Products Covered by a 3-Year Warranty

question 35

Multiple Choice

Western Company sells products covered by a 3-year warranty. Based on past experience of other entities in the industry, Western expects to incur warranty costs equal to 1% of sales. Western's sales were $40,000 in 2010 and $50,000 in 2011. In 2011, the company spent $200 to repair goods sold in 2010 and $300 to repair goods sold in 2011. Western received no warranty servicing demands from its customers in 2010, the company's first year of operations.
What is the balance in the warranty liability account on January 1, 2012?

• A) $400
• B) $500
• C) $300
• D) $0

---

Definitions:

Defamation of Character

The act of communicating false statements about a person that injure that person's reputation.

Implied Contract

A contract that is created by the acceptance or conduct of the parties rather than the written word.

Rogers' Protection Motivation Theory

A theory suggesting that people protect themselves based on four factors: perceived severity, perceived vulnerability, response efficacy, and self-efficacy.

Bem's Theory

A psychological theory proposing that individuals can develop aspects of their gender identity through the observation and imitation of gendered behavior.