During Year 3, Great Adventures sold 150 dune buggies for $4,000 each. The dune buggies carry a five-year warranty for defects. Estimates are that repair costs will average 4% of the total selling price. The warranty liability at the beginning of the year was $14,000, and $20,000 in claims was actually incurred during Year 3 to honour warranties.
What was the warranty expense for Year 3?
a.
$8,000
b.
$14,000
c.
$20,000
d.
$24,000