Radio Hut Inc. offers a two-year assurance warranty against failure of its products. The estimated liability is 1.5% in the year of sale and 3% in the second year. Sales and actual warranty expense for 2020 and 2021 were:

SalesActual Warranty Costs Incurred During Year2020$3,500,000$110,0002021$3,900,000$195,000

The warranty provision on the December 31, 2021 statement of financial position sheet was

$0.

$28,000.

$138,000.

$175,500.