In 2015, Baloga Heating Company sold 400 water heaters for $350 each. The water heaters carry a 2-year warranty for repairs. Baloga estimates that repair costs will average 2% of the total selling price. How much is recorded in the warranty liability account as a result of selling the water heaters during 2015?

a. $2,800

b. $4,200

c. No liability should be recorded until the water heaters are brought back for repairs.

d. $1,400 The part that is confusing me is if you would divide the $2,800 in half for 2015 instead of the full $2,800.