During 2010, Vanpelt Co

question 24

Multiple Choice

During 2010, Vanpelt 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, 4% in the year after sale, and 6% in the second year after sale.Sales and actual warranty expenditures for the first three-year period were as follows: What amount should Vanpelt report as a liability at December 31, 2012?

• A)$0
• B)$15,000
• C)$204,000
• D)$315,000

---

Definitions:

Subsidies

Government support for industries.

Tax Breaks

Financial incentives in the form of reduced tax rates, deductions, or credits, designed to encourage certain economic activities or investments.

Low-Interest Loans

Loans offered with a lower than average interest rate, making them more affordable for the borrower.

Subsidy

A financial contribution granted by the government to support or promote economic activities.