Wu Company Estimates Its Annual Warranty Expenses at 2 Percent

question 31

Multiple Choice

Wu Company estimates its annual warranty expenses at 2 percent of annual net sales.The following details are extracted from its financial statements: $\begin{array}{l}\text {Net sales }&\$ 4,000,000\\\text { Warranty liability account: }\\\text { January } 1,2014, \text { balance } & \$ 70,000 \text { credit } \\\text { Warranty payments during } 2014 & \$ 60,000 \text { debit }\end{array}$ After recording the 2014 warranty expense, the warranty liability account would show a December 31, 2014, balance of:

• A)$70,000
• B)$80,000
• C)$90,000
• D)$150,000

---

Definitions:

Antitrust Laws

Legislation designed to promote fair competition for the benefit of consumers by regulating anti-competitive practices.

Justice Dept.

A federal executive department of the U.S. government responsible for the enforcement of the law and administration of justice.

FTC

Refers to the Federal Trade Commission, an independent agency of the United States government, aimed at preventing anti-competitive, deceptive, and unfair business practices.

Strategic Merger

The combining of two companies with the aim of achieving specific business objectives, enhancing competitiveness, or expanding market reach.