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What amount should be presented

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Oak Co. offers a three-year warranty on its products. Oak previously estimated warranty costs to be 2% of sales. Due to a technological advance in production at the beginning of year 3, Oak now believes 1% of sales to be a better estimate of warranty costs.

Warranty costs of $80,000 and $96,000 were reported in year 1 and year 2, respectively. Sales for year 3 were $5,000,000. What amount should be presented in Oak's year 3 financial statements as warranty expense?

Reference no: EM131106581

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