Excom Sells Radios, and Each Unit Carries a Two-Year Replacement

question 73

Multiple Choice

Excom sells radios, and each unit carries a two-year replacement warranty. The cost of repair defects under the warranty is estimated at 5% of the sales price. During September, Excom sells 100 radios for $50 each. One radio is actually replaced during September. For what amount in September would Excom debit Product Warranty Expense?

• A) $50
• B) $250
• C) $30
• D) $120

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Definitions:

Primarily Contractual

Pertaining mainly to agreements made between parties that are enforceable by law.

Run With The Land

Legal principle indicating that certain rights and obligations attached to a piece of land transfer with the property from one owner to the next.

Purchaser

A person or organization that purchases products or services.

Life Estate

A property interest that lasts for the lifetime of a specific individual, after which the property passes to another designated party.