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

question 50

Multiple Choice

Kim Company sells 2,000 units of its product for $500 each in 2014. 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 $100 per unit. In 2014, warranty contracts are honoured on 40 units for a total cost of $4,000.
-What amount will be reported on Kim Company's balance sheet as Estimated Warranty Liability on December 31, 2014?

• A) $4,000
• B) $6,000
• C) $2,000
• D) cannot be determined

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Definitions:

Dialectical Behavior Therapy

A type of cognitive-behavioral therapy aimed at teaching patients skills to cope with stress, regulate emotions, and improve relationships.

Self-Mutilation

The act of deliberately harming one's own body without suicidal intent, often as a coping mechanism for emotional distress.

Impulsive

The tendency to act on a whim, displaying behavior characterized by little or no forethought, reflection, or consideration of the consequences.

Narcissistic Personality Disorder

A mental condition characterized by a long-term pattern of exaggerated self-importance, a need for excessive attention, and a lack of empathy for others.