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Question
McKay Company sells merchandise with a one-year warranty. In Year 1, sales consisted of 1,200 units. It is estimated that warranty repairs will average $10 per unit sold and 30% of the repairs will be made in Year 1 and 70% in Year 2. On the Year 1 income statement, McKay should show warranty expense of
a. $3,600
b. $8,400
c. $12,000
d. $0
Answer
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