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What amount should thomas report as its warranty expense

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Question - During 2016, the Thomas Company began selling a new type of machine that carries a two-year assurance-type warranty against all defects. Based on past industry and company experience, estimated warranty costs should total $2,000 per machine sold. During 2016, sales and actual warranty expenditures were $4,000,000 (80 machines) and $44,000, respectively. Thomas uses the GAAP approach of accruing warranty expense (and the related liability) in the year of the sale.

Required - What amount should Thomas report as its warranty expense for 2016?

A. $320,000

B. $44,000

C. $160,000

D. $0

Reference no: EM133128213

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