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Find the warranty liability as at the year-end

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Question - Belmont Inc. offers a two-year warranty against failure of its products. The estimated liability is 4% of sales in the year of sale and 6% in the second year. Sales for 2008 and 2009 were: $2,000,000 and $2,200,000, respectively. They incurred no warranty costs in 2008 but in 2009 they spent $125,000 on repairs related to the warranties from 2008 and 2009.

Please show steps. The warranty liability as at the year-end 2008 was:

a. $0

b. $80,000

c. $120,000

d. $200,000

Reference no: EM131805354

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