Exhibit 9-5 Backhoe Company Estimates Its Annual Warranty Costs to Be 4

question 86

Multiple Choice

Exhibit 9-5
Backhoe Company estimates its annual warranty costs to be 4% of annual net sales. Backhoe uses the GAAP approach of accruing warranty expense and the related liability) in the year of the sale. The following information relates to the calendar year 2015:
-Refer to Exhibit 9-5. The amount of warranty expense for 2015 is

• A) $80,000.
• B) $120,000.
• C) $140,000.
• D) $240,000.

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