Bell, Inc., an accrual basis taxpayer, makes and sells personal computing equipment. It includes basic one-year warranty service with most of its products and, for financial reporting purposes, recognizes an estimate of the expenses related to honoring those warranties when the products are sold. Bell reports the following in its financial statements for the year.

Income Statement

Warranty expense $500,000

Balance Sheet

Allowance for existing warranty contracts 1/1 $ 30,000

Allowance for existing warranty contracts 12/31 $ 40,000.

How much warranty expense may Bell deduct for the year?