During 2017, Eaton 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 sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2017 and 2018 are as follows: At December 31, 2018, (assuming the accrual method) Eaton should report an estimated warranty liability of Question 10 options: 1) $0. 2) $25,000. 3) $35,000. 4) $61,000.