Manor Inc. sells washing machines that include a two-year warranty covering parts. Experience shows that warranty expense averages about 2% of the selling price of each machine during the first 12 months following the sale and 1% during the next 12 months. Net sales totaled $400,000 during Year 1, the company’s first year of operations. Actual warranty costs incurred totaled $7,900 during Year 2 and $4,000 during Year 3. What is the amount of warranty expense that should be reported on the income statement for Year 1?