Poseidon Awning Corporation introduced a new line of commercial awnings in year 1 that carry a two-year warranty against manufacturers defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 2% of sales. Sales and actual warranty expenditures for the first year of selling the product were:

Sales = $4,361,000

Actual Warranty Expenditures = $35,000

What amount should Poseidon report as a liability at December 31, year 1?