During 2015, Gum Co. introduced a new product carrying a two-year assurance-type warranty against defects....
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Accounting
During 2015, Gum Co. introduced a new product carrying a two-year assurance-type warranty against defects. Gum Co. uses the expense warranty approach. The estimated warranty costs related to dollar sales are 4%. Sales and actual warranty expenditures for the years ended December 31, 2015 and 2016 are as follows: What amount should Gum report as warranty expense on its 2016 income statement?
Select one:
a. $7,500
b. $10,000
c. $3,750
d. $1,250
e. $6,250
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