Warranty Liability

Sound Portal Corporation sells stereos under a 2-year warranty contract that requires Sound Portal to replace defective parts and provide free labor on all repairs. During 2012, 1,290 units were sold at $950 each. In 2013, Sound Portal sold an additional 1,100 units at $980. Based on past experience, the estimated 2-year warranty costs are $25 for parts and $30 for labor per unit. It is also estimated that 40% of the warranty expenditures will occur in the first year and 60% in the second year. Actual warranty expenditures were as follows:

2013 2014 Stereos sold in 2012 . $28,500 $37,800 28,200