3. During 2020, Eaton Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 3% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2020 and 2021 are as follows: Actual Warranty Sales Expenditures 2020 $ 800,000 $12,000 2021 1,200,000 35,000 $2,000,000 $47.000 At December 31, 2021. (assuming the accrual method) Eaton should report an estimated warranty liability of a. $0. b. $53,000. c. $73,000. d. $61,000. e. None of the above. 4. In March 2018, an explosion occurred at Kirk Co.'s plant, causing damage to area properties. By May 2018, no claims had yet been asserted against Kirk. However, Kirk's management and legal counsel concluded that it was reasonably possible that Kirk would be held responsible for negligence, and that $5,000,000 would be a reasonable estimate of the damages. Kirk's $6,000,000 comprehensive public liability policy contains a $500,000 deductible clause. In Kirk's December 31, 2017 financial statements, for which the auditor's fieldwork was completed in April 2018, how should this casualty be reported ? a. As a note disclosing a possible liability of $5,000,000 b. As an accrued liability of $500,000. c. As a note disclosing a possible liability of $500,000 d. No note disclosure of accrual is required for 2017 because the event occurred in 2018