Company B follows USGAAP and sells its products with a one year warranty. Company B does not provide warranty repair on its products and, instead, contracts with a service company to provide all repairs. When is warranty expense recognized on Company B's income statement?

In the period Company B pays the third party service company for work performed.

In the period the item is sold.

In the period the item is repaired.

In the period the customer returns the item.

None of the other choices are correct.