During 2006, Blass Co. introduced a new product carrying

Please provide detailed steps to solve this problem, thanks.

During 2006, Blass Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 4.55% within 12 months following sale and 5.45% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2006 and 2007 are as follows:
Actual Warranty
Sales Expenditures
2006 $ 400,000 $18,000
2007 500,000 30,000
At December 31, 2007, Blass should report an estimated warranty liability of
a. 21,800
b. 22,750
c. 42,000
d. 90,000

the correct answer is C. 42,000.