Exhibit 13-5 Tractor Company estimates its annual warranty expense at 4% of annual net sales.The following information relates to the calendar year 2010:
$\begin{array}{l}
\text { Net sales } &\$ 3,000,000 \
\text { Estimated liability under } \
\text { warranties: }
\end{array}$

$\begin{array}{ll}
\text { January } 1,2010 & 100,000 \
\text { December } 31,2010 \text {, after year-end adjustment } & 80,000
\end{array}$

- Refer to Exhibit 13-5.The amount of expenditures for warranty costs for 2010 is

Question

Exhibit 13-5 Tractor Company estimates its annual warranty expense at 4% of annual net sales.The following information relates to the calendar year 2010:
$\begin{array}{l}
\text { Net sales } &\$ 3,000,000 \
\text { Estimated liability under } \
\text { warranties: }
\end{array}$

$\begin{array}{ll}
\text { January } 1,2010 & 100,000 \
\text { December } 31,2010 \text {, after year-end adjustment } & 80,000
\end{array}$

-  Refer to Exhibit 13-5.The amount of expenditures for warranty costs for 2010 is

Quizplus · Accepted Answer

To calculate the amount of expenditures for warranty costs for 2010, we need to multiply the estimated warranty expense rate of 4% with the annual net sales. The annual net sales are not provided in the question, so we cannot calculate the amount of expenditures exactly. However, we know that the answer choice must be divisible by 4 to be a valid option. 
Option A: $80,000 is not divisible by 4 and cannot be the answer.
Option B: $120,000 is divisible by 4 and could be the answer, but it's not the only option.
Option C: $140,000 is also divisible by 4 and is therefore a valid option. 
Option D: $240,000 is not divisible by 4 and cannot be the answer. 
Since we do not have the annual net sales data to calculate the exact amount, there are multiple valid options for the amount of expenditures for warranty costs. However, the best choice based on the information given is C.

Exhibit 13-5 Tractor Company Estimates Its Annual Warranty Expense at 4