Warranties}

In 2018, Wang Balloons sold 50 hot air balloons at \(\$ 25,000\) each. The balloons carry a five-year warranty for defects. Wang estimates that repair costs will average \(3 \%\) of the total selling price. The estimated warranty liability at the beginning of the year was \(\$ 40,000\). Claims of \(\$ 15,000\) were actually incurred during the year to honour warranties.

\section*{Required:}

What was the balance in the warranty liability at the end of 2018 ?

\section*{Cornerstone Exercise