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What amount of warranty expense should shown on acorn

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Problem 1: On January 1, 2021, ACORN Company offered a three-year warranty from date of sale on any of its products sold after that date. The offer was part of a program to increase sales. Meeting the terms of the warranty was expected to cost 2% of sales. Sales made under warranty in 2021 amounted to ?9,000,000. One fifth of the units sold in 2021 were returned. These units were repaired or replaced at a cost of ?32,500. What amount of warranty expense should be shown on ACORN's 2021 income statement?

Option 1: ? 32,500

Option 2: ? 68,500

Option 3: ? 180,000

Option 4: ? 35,500

Reference no: EM132999157

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