Thomson co. produces and distributes semiconductors for use by computer manufacturers. thomson issued $900,000 of 10-year, 7% bonds on may 1 of the current year at face value, with interest payable on may 1 and november 1. the fiscal year of the company is the calendar year.

Right medical introduced a new implant that carries a five-year warranty against manufacturer’s defects. based on industry experience with similar product introductions, warranty costs are expected to approximate 2% of sales. sales were $8 million and actual warranty expenditures were $42,750 for the first year of selling the product. what amount (if any) should right report as a liability at the end of the year?