In March 2016, Emett Motors began selling extended warranties for the vehicles it sells. The extended warranties cover parts and labor for all repairs to brakes and powertrain. Emett sold $10,000 of the extended warranties in March, and estimates that it will incur $6,000 of cost over the five-year time period to fulfill them (the present value of the $6,000 is $5,000). In March 2016, Emett would record:

Deferred revenue of $10,000

A contingent liability of $6,000 and deferred revenue of $10,000

A contingent liability of $5,000

A contingent liability of $6,000