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[33] Zound Box, Inc., uses the revenue approach to account for warranties. During 2021, the company sold a special stereo equipment to the Montreal Art
[33] Zound Box, Inc., uses the revenue approach to account for warranties. During 2021, the company sold a special stereo equipment to the Montreal Art Centre for $500,000 and carrying a two-year warranty (included in the price). It was estimated that 3% of the selling price represented warranty revenues. Further, 60% of this revenue related to 2021, and the balance was allocated to the following year. Assume that Zound Box incurred costs of $4,700 to service the contract in 2021. Determine the warranty revenue, the unearned warranty revenue and the warranty expense reported by Zound Box in its 2021 financial statements. Select one: a. Warranty Revenue - $15,000; Unearned Warranty Revenue - $15,000; Warranty Expenses - $4,700. b. Warranty Revenue - $15,000; Unearned Warranty Revenue - $15,000; Warranty Expenses - $9,400. c. Warranty Revenue - $9,000; Unearned Warranty Revenue - $9,000; Warranty Expenses - $9,400. d. Warranty Revenue - $9,000; Unearned Warranty Revenue - $15,000; Warranty Expenses $4,700. e. none of the above
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