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:

Select one:

a. Consider the warranty expense a contingent liability.

b. Recognize warranty expense and liability in the year of the sale.

c. Consider the warranty expense a remote liability since the rate is only 2%.

d. Recognize warranty expense at the time the warranty work is performed.