Talks-A-Lot, Inc

Talks-A-Lot, Inc. sells cell phones to customers and expects that 10% of phones sold will be returned for repair under its warranty program. The average repair cost is $75 per phone. For 2012, Talks-A-Lot has sold 750 cell phones and has repaired 30 of them as of December 31, 2012. What amount of warranty liability should be reported at December 31, 2012?

A) $2,250.
B) $3,375.
C) $5,625.
D) None, all expected returns from warranties have been receiveD.[(750 x 10%) x $75] = $5,625.