Scott Company Sells Merchandise with a One-Year Warranty

question 124

Multiple Choice

Scott Company sells merchandise with a one-year warranty. Sales consisted of 2,500 units in Year 1 and 2,000 units in Year 2. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in Year 1 and 70% in Year 2 for the Year 1 sales. Similarly, 30% of repairs will be made in Year 2 and 70% in Year 3 for the Year 2 sales. In the Year 3 income statement, how much of the warranty expense shown will be due to Year 1 sales?

• A) $6,000
• B) $14,000
• C) $20,000
• D) $0

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Definitions:

Omit Negative Information

The practice of deliberately leaving out unfavorable data or facts from communication to influence perception.

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Of little significance or value; unimportant or insignificant tasks or matters.

Negative Information

Information that is unfavorable or detrimental, requiring careful handling when being communicated to avoid adverse reactions.

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