Rama, Inc. offers a two-year warranty against failure of its products. The estimated liability is 4% of sales in the year of sale and 6% in the second year. Sales for 2005 and 2006 were: $2,000,000 and $2,500,000, respectively. What is the warranty liability for 2005:

Sales of $2,000,000 * 4% for the first year

isn't it 2,000,000 * 0.1 = 200,000
?