In 2016, Baloga Heating Company sold 400 water heaters for $350 each. The water heaters carry a 2-year warranty for repairs. Baloga estimates that repair costs will average 2% of the total selling price. How much is recorded in the warranty liability account as a result of selling the water heaters during 2016?
a. $4,200
b. $2,800
c. $1,400
d. No liability should be recorded until the water heaters are brought back for repairs.
b
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