During 2015, Blevert Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty
costs are estimated at 2% of sales in the year of sale, 3% in the year after sale, and 5% in the second year after sale. Sales and actual warranty expenditures for the
first three-year period were as follows:
2015
2016
2017
Sales
Actual Warranty Expenditures
$200,000
$6,000
1,500,000
25,000
2,000,000
105,000
$3,700,000
136,000
What amount should Blevert report as a liability at December 31, 2017?
A. $234,000
B. $200,000
C. $370,000
D. $265,000
Click to select your answer.
