In 2016, Scranton, Inc

question 150

Multiple Choice

In 2016, Scranton, Inc.sold 2,000 carpets for $50 each.The carpets carry a 2-year warranty for repairs.Scranton estimates that repair costs will average 3% of the total selling price.What is the amount that would be recorded in the warranty liability account as a result of selling the carpets during 2016?

• A) $1,500
• B) $3,000
• C) $50
• D) No liability should be recorded until the carpets are returned for repairs.

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Definitions:

Sellers

Entities or individuals that make available goods or services for purchasing within the market.

Price Taker

An economic actor that accepts the prevailing market prices and lacks the power to influence those prices due to its small market share.

Natural Monopoly

A market condition where a single supplier is most efficient in serving the entire market's demand, often due to high barriers to entry like significant infrastructural costs.

Perfect Competition

A market structure characterized by a large number of buyers and sellers, homogeneous products, free entry and exit, and perfect information.