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During 2013, Rao Co. introduced a new line of machines that carry a three-year warranty...

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Accounting

During 2013, Rao Co. introduced a new line of machines that carry a three-year warranty against manufacturers defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 3% in the year after sale, and 5% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: (assume the accrual method) Sales Actual Warranty Expenditures 2013 $ 1,600,000 $ 39,000 2014 2,500,000 65,000 2015 2,100,000 135,000 $6,200,000 $239,000 What amount should Rao report as a liability at December 31, 2015?

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