Exhibit 9-5 Backhoe Company Estimates Its Annual Warranty Expense at 4

Exhibit 9-5 Backhoe Company estimates its annual warranty expense at 4% of annual net sales. The following information relates to the calendar year 2013:
$\begin{array} { l l} \$ 3,000,000& \text { Net sales Estimated liability under warranties:}\\100,000 & \text { January 1, 2013}\\80,000& \text { December 31,2013 , after year-end adjustment}\end{array}$

-Refer to Exhibit 9-5. The amount of warranty expense for 2013 is

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

Correct Answer:

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