Madden Electric Began Operations in 2010 and Provides a One

question 32

Multiple Choice

Madden Electric began operations in 2010 and provides a one year warranty on the products it sells. They estimate that 10,000 of the 200,000 units sold in 2010 will be returned for repairs and that these repairs will cost $6 per unit. The cost of repairing 8,000 units presented for service in 2010 was $48,000. Madden should report

• A) warranty expense of $12,000 for 2010.
• B) warranty expense of $60,000 for 2010.
• C) estimated warranty liability of $60,000 on December 31, 2010.
• D) no warranty obligation on December 31, 2010, since this is only a contingent liability.

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Definitions:

CNS Stimulant

A class of drugs that increases the activity of the central nervous system, enhancing mental alertness, attention, and energy.

Central Nervous System

The part of the nervous system consisting of the brain and spinal cord, which processes information and controls responses.

Midline

An imaginary line or anatomical axis that divides an organism's body into symmetrical or equal left and right halves.

Interneurons

Specialized neurons that transmit impulses between other neurons, especially as part of reflexes or neural circuits.