What is the balance for warranty liability

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Question - Consumer Tech Ltd. provides a two-year warranty on all products it sells to customers. The following information is provided for the company's 2020 fiscal year:

Total sales made in 2020 $25,000,000

Estimated cost of servicing products under warranty 2% of sales

Warranty liability balance at January 1, 2020 $40,000

Expenditures to satisfy warranty claims in 2020 $38,000

What is the balance for warranty liability at the company's year-end on December 31, 2020?

a) $578,000

b) $502,000

c) $500,000

d) $498,000

Reference no: EM132956087

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