Question $8$

$5$ pts

Shack Inc. sells washing machines that include a two$-$year warranty covering parts. Experience shows that warranty expense averages about $2\%$ of the selling price of each machine during the first $12$ months following the sale and $1\%$ during the next $12$ months. Net sales totaled $$400,000$ during Year $1,$ the company's first year of operations. Actual warranty costs incurred totaled $$7,900$ during Year $1$ and $$4,000$ during Year $2.$

Required: What is the amount of warranty expense that should be reported on the income statement for Year $2?($Hint: it might be helpful to think of what would be expensed in year $1.)$

$0$

$7900$

$4100$

$4000$