Indexation refers to a. a process of adjusting the nominal interest rate so that it is equal to the real interest rate. b. an adjustment made by the Bureau of Labor Statistics to the CPI so that the index is in line with the GDP deflator. c. using a price index to deflate dollar values. d. using a law or contract to automatically correct a dollar amount for the effects of inflation.

Right medical introduced a new implant that carries a five-year warranty against manufacturer’s defects. based on industry experience with similar product introductions, warranty costs are expected to approximate 2% of sales. sales were $8 million and actual warranty expenditures were $42,750 for the first year of selling the product. what amount (if any) should right report as a liability at the end of the year?