Western warrants most products it sells against defects in materials and workmanship for a period of a year. Based on their experience with previous product introductions, warranty costs are expected to approximate 2% of sales. A warranty liability of $39 million was reported at December 31, 2017. Sales of warranted products during 2018 were $2,100 million and actual warranty expenditures were $40 million. Determine the appropriate means of reporting this situation.