Time Remaining $59$ minutes $44$ seconds

$00$:$59$:$44$

Item $12$

Time Remaining $59$ minutes $44$ seconds

$00$:$59$:$44$

A company sold $$12,000$ worth of bicycles with an extended warranty. The company$$s experience is that warranty expense averages $2\%$ of sales. The company should:

Multiple Choice

Consider the warranty expense a contingent liability.

Recognize warranty expense at the time the warranty work is performed.

Consider the warranty expense a remote liability since the rate is only $2\%.$

Recognize warranty liability when the company purchases the bicycles.