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During 2006, Younger Co. introduced a new line of machines that carry a three-year warranty against manufacturers defects. Based on industry experience, warranty costs are
During 2006, Younger Co. introduced a new line of machines that carry a three-year warranty against manufacturers defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 6% in the second year after sale. Sales and actual warranty expenditures, respectively, were $600,000 and $9,000 for 2006, $1,500,000 and $45,000 for 2007, and $2,100,000 and $135,000 for 2008. What amount should Younger report as a liability at December 31, 2008?
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