Sony introduces a new compact music player to compete with
Apple’s iPod that carries a two-year warranty against
manufacturer’s defects. Based on industry experience with similar
product introductions, warranty costs are expected to be
approximately 2% of sales. By the end of the first year of selling
the product, total sales are $30.6 million, and actual warranty
expenditures are $260,000. What amount (if any) should Sony report
as a liability at the end of the year?