Power Company Sells Merchandise with a One Year Warranty

question 38

Multiple Choice

Power Company sells merchandise with a one year warranty. In 2012, sales consisted of 1,600 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in 2012 and 70% in 2013. In the 2012 income statement, Power should show warranty expense of

• A) $4,800
• B) $11,200
• C) $16,000
• D) $0

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Definitions:

Agency Request

A formal appeal or demand made by an agency for something to be given, supplied, or performed.

Facilities

Buildings, services, equipment, etc., provided for a particular purpose, such as healthcare, education, or sport.

Business Firm

An organization engaged in commercial, industrial, or professional activities, either for profit or non-profit.

Independent Regulatory Agencies

Independent regulatory agencies are federal bodies created by Congress to enforce and regulate specific areas of economic activity, operating with some degree of independence from executive control.