Complete all part and sub part Proper solutionAnd Do not Give solu tion in image formet P9-6 Defining and Analyzing Changes in Current Liabilities LO9-1International Business Machines (IBM) is a leading provider of computer products and services. The company is known for its hardwareproducts but has focused on providing information technology services in recent years. IBM provides standard warranties andextended warranties with the sale of its products. The company's note on significant accounting policies is as follows:The company offers warranties for its hardware products that generally range up to three years, with the majority being either one orthree years. Estimated costs for standard warranty terms are recognized when revenue is recorded for the related product. Thecompany estimates its warranty costs standard to the product based on historical warranty claim experience and estimates of futurespending, and applies this estimate to the revenue stream for products under warranty. Estimated future costs for warrantiesapplicable to revenue recognized in the current period are charged to cost of sales. The warranty liability is reviewed quarterly toverify that it properly reflects the remaining obligation based on the anticipated expenditures over the balance of the obligation period.Revenue from extended warranty contracts is initially recorded as deferred income and subsequently recognized on a straight-linebasis over the delivery period because the company is providing a service of standing ready to provide services over such term.Selected information related to warranties provided by IBM follows (in millions of U.S. dollars):2018 2017 2016$79,891 $79,439 $80,219Net revenuesStandard warranty liability, end of yearCharges incurred during the year.124129Extended warranty deferred revenue, end of year539Revenue deferred for new extended warranty contracts 226Warranty expenseRequired:1. Compute the amount of warranty expense for 2017 and 2018. (Enter your answers in millions of dollars.)Show Transcribed TextView transaction list2018Journal entry worksheet< 122. Prepare journal entries to record both the warranty expense for 2018 and the payments made under the warranty during the year. (Ifno entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers inmillions of dollars.)Record to recognize the warranty expense for the year.Note: Enter debits before credits.TransactionA2017Record entryGeneral JournalShow Transcribed Text158171572273Clear entry162170537269DebitCreditView general journal>2. Prepare journal entries to record both the warranty expense for 2018 and the payments made under the warranty during the year. (Ifno entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers inmillions of dollars.) 2. Prepare journal entries to record both the warranty expense for 2018 and the payments made under the warranty during the year. (Ifno entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers inmillions of dollars.)View transaction listJournal entry worksheet< 1 2Record to settlements made under the product warranty.Note: Enter debits before credits.TransactionBRecord entryShow Transcribed TextThe ratioRatio of warranty expense to net revenuesGeneral JournalShow Transcribed Text3-a. Compute the ratio of the warranty expense to net revenues for the three years. The Standard warranty liability had a balance of$187 at the beginning of 2016. (Round percentage answers to 2 decimal places (i.e., 0.1243 should be entered as 12.43).)O YesO NoClear entryExtended Warranty revenueView transaction list3-b. Has the ratio increased or decreased during the three-year period? (Enter your answers in millions of dollars.)2018from 2016 to 2017, and1Debit2018Journal entry worksheet<Credit20174. Based on the limited information available about the warranty expense and settlements during these three years, should IBM reducethe ratio of the warranty expense to net sales in future years?View general journal20175-a. Compute the extended warranty revenue recognized during 2017 and 2018. (Enter your answers in millions of dollars.)>2016from 2017 to 2018.5-b. Prepare the journal entry to record the revenue recognized in 2018. (If no entry is required for a transaction/event, select "Nojournal entry required" in the first account field. Enter your answers in millions of dollars.)>

Warranty expense is the expense that is bear by the seller if the product sold by the seller is…

International Business Machines (IBM) is a leading provider of computer products and services. The company is known for its hardware products but has focused on providing information technology services in recent years. IBM provides standard warranties and extended warranties with the sale of its products. The company's note on significant accounting policies is as follows: The company offers warranties for its hardware products that generally range up to three years, with the majority being either one or three years. Estimated costs for standard warranty terms are recognized when revenue is recorded for the related product. The company estimates its warranty costs standard to the product based on historical warranty claim experience and estimates of future spending, and applies this estimate to the revenue stream for products under warranty. Estimated future costs for warranties applicable to revenue recognized in the current period are charged to cost of sales. The warranty liability is reviewed quarterly to verify that it properly reflects the remaining obligation based on the anticipated expenditures over the balance of the obligation period. Revenue from extended warranty contracts is initially recorded as deferred Income and subsequently recognized on a straight-line basis over the delivery period because the company is providing a service of standing ready to provide services over such term.

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Activities Required In Completing A Quality Audit

Section: Chapter Questions

Problem 65RSCQ