Osuoyidlot Inc, estimates its warranty expense for its products as 5% of its dollar sales.

The company also has a policy to maintain a minimum balance of $12,000 in its Estimated Warranty Liability account.

The company uses the calendar year as its fiscal year, and as of January 1, 2016, Estimated Warranty Liability account had a $16,500 normal balance.

During years 2016 to 2018, the company reported the following activity.

Year	Total Sales	Warranty %	Actual Warranty Replacements
2016	$1,000,000	5.00%	$78,000.00
2017	1,400,000	5.00%	64,000.00
2018	1,600,000	5.00%	89,000.00

How much warranty expense must the company recognize for year 2016? Show Calculations.

A. $73,500

B. $78,000

C. $50,000

D. $11,500

E. $70,000