Ford Motor Company disclosed the following estimated product warranty payable for two recent years. December 31,...

 

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Ford Motor Company disclosed the following estimated product warranty payable for two recent years. December 31, Year 2 Year 1 (in millions) $3,915 Product warranty payable Ford's sales in its automotive sector were $128,168 million in Year 2 and $119,280 million in Year 1. Assume that the total paid on warranty claims during Year 2 was $2,799 million. a. Illustrate the effects on the accounts and financial statements for the Year 2 product warranty expense. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Statement of Cash Flows No effect # No effect Assets Statement of Cash Flows $3,855 Balance Sheet Liabilities Product Warranty Payable + -247448000 b. All of the following are reasons why Ford's total warranty liability might decrease except: Ford's actual claims experience might be increasing. Stockholders' Equity Retained Earnings + Income Statement Product warranty expense Income Statement Ford Motor Company disclosed the following estimated product warranty payable for two recent years. December 31, Year 2 Year 1 (in millions) $3,915 Product warranty payable Ford's sales in its automotive sector were $128,168 million in Year 2 and $119,280 million in Year 1. Assume that the total paid on warranty claims during Year 2 was $2,799 million. a. Illustrate the effects on the accounts and financial statements for the Year 2 product warranty expense. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Statement of Cash Flows No effect # No effect Assets Statement of Cash Flows $3,855 Balance Sheet Liabilities Product Warranty Payable + -247448000 b. All of the following are reasons why Ford's total warranty liability might decrease except: Ford's actual claims experience might be increasing. Stockholders' Equity Retained Earnings + Income Statement Product warranty expense Income Statement

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