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During 2016, Waterway Industries introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are

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During 2016, Waterway Industries introduced a new line of machines that carry a three-year warranty against manufacturer's 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) Sales Actual Warranty Expenditures $41000 2016 $1591000 2017 2505000 66000 2018 2101000 133000 $6197000 $240000 What amount should Waterway report as a liability at December 31, 2018

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