During 2013, Rao Co

question 155

Short Answer

During 2013, Rao Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 3% in the year after sale, and 5% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: (assume the accrual method) What amount should Rao report as a liability at December 31, 2015?
A) $0
B) $134,000
C) $105,000
D) $381,000

• A) $0
• B) $134,000
• C) $105,000
• D) $381,000

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Definitions:

Ineffective breathing pattern

A clinical situation where the individual's breathing pattern does not adequately support life-sustaining gas exchange.

Insomnia

A sleep disorder characterized by difficulty falling and/or staying asleep.

Narcolepsy

A chronic sleep disorder characterized by overwhelming daytime drowsiness and sudden attacks of sleep.

Continuous positive airway pressure

A medical treatment that uses mild air pressure to keep an individual's airways open, typically used for those with breathing problems during sleep, such as obstructive sleep apnea.