Ford Motor Company disclosed the following estimated product warranty payable for two recent years. Fords sales were

Ford Motor Company disclosed the following estimated product warranty payable for two recent years.

Ford’s sales were $128,954 million in Year 2 and $116,283 million in Year 1.
Assume that the total paid on warranty claims during Year 2 was $2,176 million.
a. Illustrate the effects on the accounts and financial statements for the Year 2 product warranty expense.
b. Assuming $2,176 million in warranty claims paid during Year 2, explain the $501 ($3,147 - $2,646) million decrease in the total warranty liability from Year 1 to Year2.

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December 31, Year 2 Yr 1 (in millions) $2,646 $3,147 Product warranty payable