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During 2020, AAA introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated

During 2020, AAA 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 1% of sales

in the year of sale, 2% in the year after sale, and 3% in the second year after sale. Sales and actual

warranty expenditures for the first three-year period were as follows:

Sales Actual Warranty Expenditures

2020 $ 1,400,000 $ 26,000

2021 1,000,000 40,000

2022 1,400,000 90,000

$3,800,000 $156,000

What amount should AAA report as a liability at December 31, 2021?

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