A new product introduced by Maude Corporation carries a 2-year warranty against defects. The estimated warranty costs related to dollar sales are as follows: | Year of sale | 3% | | Year after sale | 5% |
Sales and actual warranty expenditures for the years ended December 31, year 1 and year 2 are as follows:
| | | | | | Sales | Actual warranty expenditures | | Year 1 | $400,000 | $10,000 | | Year 2 | 500,000 | 35,000 |
What amount should Maude report as its estimated warranty liability as of December 31, year 2?
A. $ 2,000B. $12,000 C. $27,000 D. $37,000 |
