Horace Company sells toaster ovens with an extended warranty which kicks in after the embedded warranty expires after 2 years. During 20X5, Horace sold 6,000 toaster ovens, out of which extended warranty was purchased for 2,000 for $5 each. Based on the past, Horace believes that 100 toaster ovens will have to be repaired at an average cost of $10 each. In 20X5, Horaces accountant correctly recorded warranty expense for the embedded warranty. The accountant also debited cash and credited revenue for $10,000 for the extended warranty sales. Which of the following is true?