During 2016, Gum 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 the sale and 4% in the second 12 months following the sale. Sales and actual warranty expenditures for the years ended December 31, 2016, and 2017, are as follows:

What amount should Gum report as estimated warranty liability in its December 31, 2017, balance sheet?

$ 2,500

$ 4,250

$ 11,250

$ 14,250

My Question:

I am confused as to why we just add up the two percentages and multiply by the total sales in 2016 and 2017.

Here's my logic:

Estimate the warranty liability in each year:

In 2016, the estimate is based on 2% of 2016 sales.

In 2017, the estimate is based on 2% of 2017 sales and an additional 4% of 2016 sales.

Which would lead to a total liability of $14,000 minus the actual warranty costs of $9,750.

My question is, what in the wording of this question should signal to me to base the estimate on the total sales in the two years using one percentage--rather than the individual year sales?