Accounting

Problem 10 Allan Co. offers a one-year warranty on its products. The warranty liability account had a balance of $220,000 on December 31, 2014. Allan estimates their warranty expense to be equal to 4% of sales revenue. Sales in 2015 were $8,450,000. Costs incurred in servicing warranties in 2015 amounted to $155,000. What is the balance in the warranty liability account on December 31, 2015?

Problem 10 options:

a)

$403,000

b)

$338,000

c)

$558,000

d)

$188,000