A company estimates warranty costs to be 6% of sales. If sales are \$1,000,000, what is the warranty expense recorded, and how does this compare to the allowance for doubtful accounts method?

• A. Warranty expense is \$60,000, similar to recording bad debt expense based on a percentage of sales.
• B. Warranty expense is \$60,000, different from recording bad debt expense based on a percentage of sales.
• C. Warranty expense is \$6,000, similar to recording bad debt expense based on a percentage of sales.
• D. Warranty expense is \$6,000, different from recording bad debt expense based on a percentage of sales.

Answer: (A)