Problem:
Computers Inc. sells computers for $2,000 each and also gives eeach customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2004, the company sold 700 computers. Based on past experience, the ocmpany has estimated the total 2-year warranty costs per computer as $40 for parts and $80 for labor. (Assume all sales occur at December 31, 2004). In 2005, Computers Inc. incurred actual warranty costs relative to 2004 computer sales of $10,000 for parts and $24,000 for labor.
Required:
Question: Under the expense warranty treatment, (accrual method) what is the balance under current liabilities in the 2004 balance sheet?
A. $84,000
B. $24,000
C. $34,000
D. none of the above
Note: Please show the work not just the answer.