Explaining Revenue Recognition and Bundled Sales A.J. Smith Electronics is a retail consumer electronics company that also sells extended warranty contracts for many of the products that it carries. The extended warranty provides coverage for three years beyond expiration of the manufacturer's warranty. In 2016, A.J. Smith sold extended warranties amounting to $2,400,000. The warranty coverage for all of these begins in 2017 and runs through 2019. The total expected cost of providing warranty services on these contracts is $960,000. a. How should AJ. Smith recognize revenue on the extended warranty contracts? Select the most appropriate answer below. OAJ. Smith should recognize the extended warranty revenue in the year of sale of the electronics OAJ.Smith should recognize the extended warranty revenue when the manufacturer's warranty expires. AJ. Smith should recognize the extended warranty revenue proportionately during the three years of coverage. OAJ. Smith should recognize the extended warranty revenue in the final year of the extended warranty b. Estimate the revenue, expense, and gross profit reported from these contracts in the year(s) that the revenue is recognized Round answers to the nearest whole numbers. Year 2017 2018 2019 Total Revenue 800000800000 800000 2400000 Warranty expenses 320000 320000 320000 960000 Gross profit4 480000480000 4800001440000