Final answer:
The estimated warranty liability at the end of 2017 for General Dynamics Corporation is $46,000, calculated by adding the estimated second-year warranty liability for 2016 sales (5% of $600,000) and the estimated first-year warranty liability for 2017 sales (2% of $800,000).
Step-by-step explanation:
To calculate the estimated warranty liability at the end of 2017 for General Dynamics Corporation, we need to apply the percentages given for the warranty costs against the sales for each year.
For the first year (2016), the warranty cost is 2% of sales, and for the second year (2017), it's 5% of the previous year's sales.
The sales in 2016 were $600,000. Therefore, the estimated warranty liability for the second year of warranty for 2016 sales is 5% of $600,000, which is $30,000.
The sales in 2017 were $800,000. Hence, the estimated warranty liability for the first year of warranty for 2017 sales is 2% of $800,000, which equals $16,000.
To find the total estimated warranty liability at the end of 2017, we add the liability for both years: $30,000 (from 2016 sales) + $16,000 (from 2017 sales) = $46,000.
We must also consider the actual warranty expenditures to date. The question provides actual expenditures of $20,000 for 2016 and $40,000 for 2017. However, these are not directly relevant to the liability calculation for the end of 2017 as they have likely been subtracted from the warranty liability already recognized in those respective years.
Therefore, the estimated warranty liability at the end of 2017 is $46,000.