Wall Company sells a product under a two-year warranty. The estimated cost of warranty repairs is 2% of net sales. During Wall's first two years in business, it made the following sales and incurred the following warranty repair costs:
Year 1 Total sales$ 250,000Total repair costs incurred$ 4,500Year 2 Total sales$ 300,000Total repair costs incurred$ 5,000
What amount should Wall report as warranty expense for year 2?
Multiple Choice
$5,900
$1,000
$5,000
$6,000