During 2016, Rao 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, 3% in the year after sale, and 4% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: (assume the accrual method)

SalesActual Warranty Expenditures

2016$1,600,000$39,000

20172,500,00065,000

20182,100,000135,000

$6,200,000$239,000

What amount should Rao report as a liability at December 31, 2018?

a.$0

b.$71,000

c.$84,000

d.$319,000