2) A company sold $12,000 worth of bicycles with an extended warranty. The company's experience is that warranty expense averages 2% of sales. The company should:

A) Recognize warranty expense at the time the warranty work is performed.

B) Recognize warranty liability when the company purchases the bicycles.

C) Consider the warranty expense a contingent liability. D) Consider the warranty expense a remote liability since the rate is only 2%.

E) Recognize warranty expense and liability in the year of the sale.