Shaw Company Sells 2,000 Units of Its Product for $500

question 8

Multiple Choice

Shaw Company sells 2,000 units of its product for $500 each. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $50 per unit. In the year of sale, warranty contracts are honored on 40 units for a total cost of $2,000. What amount will be reported on Shaw Company's balance sheet as Estimated Warranty Liability on December 31, 2010?

• A) $2,000
• B) $3,000
• C) $1,000
• D) It cannot be determined.

---

Definitions:

Nucleus Accumbens

A region in the brain that plays a central role in the reward circuit, associated with pleasure, reinforcement learning, and addiction.

Reward Circuitry

The brain systems involved in the recognition and pursuit of rewards, playing a key role in motivation, pleasure, and addiction.

Contraception

Methods or devices used to prevent pregnancy as a result of sexual intercourse, aiming at controlling fertility and childbirth.

Intrauterine Device

A small contraceptive device, often T-shaped, inserted into the uterus to prevent pregnancy.