D. Scott Corporation provides a two-year warranty with the sale of its product. Scott estimates that warranty costs will equal 4% of the selling price the first year after sale and 6% of the selling price the second year after the sale. The following data are available:
|
2013 |
2014 |
|
|
Sales |
$400,000 |
$500,000 |
|
Actual warranty expenditures |
10,000 |
38,000 |
The balance of the warranty liability at December 31, 2014 should be:
- $12,000.
- $42.000.
- $44,000.
- $50,000.