b. Reformulate the income statement for all three years under the assumption that warranty expense is a constant percentage of revenue across all three years. Specifically, compute adjustments to: warranty expense, income tax expense, and net income. Assume the company's tax rate is Note: Enter an increase in expense as positive and a decrease in expense as negative. Note: Enter an increase in net income as positive and a decrease in net income as negative. Note: Round answer to the nearest dollar, if applicable. Note: Do not round intermediate calculation, if applicable. $ millions Adjustment to warranty expense x $ Two Years Prior 1175 Prior Year Current Year Adjustment to income tax expense (22%) Adjustment to net income -26 -92- 2395 -53✔ -186✓ x c. Reformulate the balance sheet for all three years. Specifically, compute adjustments to: warranty liabilities, deferred tax assets, and retained earnings. Assume the company's tax rate is 22%. Note: Enter an increase in account balance as positive and a decrease in account balance as negative. Note: Round answer to the nearest dollar, if applicable. Note: Do not round intermediate calculation, if applicable. Two Years Prior Prior Year 1175 Current Year 0 26- x 0 -92- x 0 $ millions Adjustment to warranty liabilities S Adjustment to deferred tax assets Adjustment to retained earnings Reformulating Financial Statements for Warranty Expense Ford Motor Company reported the following information in its current fiscal year financial statements. Use these data to answer the requirements. Warranty Liability $ millions Two Years Prior Prior Year Current Year Beginning balance $4,558 $4,960 $5,296 Payments made during the period (3,286) (3,457) (4,360) Changes in accrual related to warranties issued during the period Changes in accrual related to pre-existing warranties 2,326 2,260 2,584 1,360 1,415 1,758 Foreign currency translation and other 2 118 (141) $4,960 $5,296 $5,137 Ending balance The income statement reports the following additional information. $ millions Two Years Prior Prior Year Current Year Automotive revenues $141,547 $145,653 $148,294 Financial services revenues Total revenues 10,253 $151,800 $156,766 11,113 12,018 $160,312

b. Reformulate the income statement for all three years under the assumption that warranty expense is a constant percentage of revenue across all three years. Specifically, compute adjustments to: warranty expense, income tax expense, and net income. Assume the company's tax rate is Note: Enter an increase in expense as positive and a decrease in expense as negative. Note: Enter an increase in net income as positive and a decrease in net income as negative. Note: Round answer to the nearest dollar, if applicable. Note: Do not round intermediate calculation, if applicable. $ millions Adjustment to warranty expense x $ Two Years Prior 1175 Prior Year Current Year Adjustment to income tax expense (22%) Adjustment to net income -26 -92- 2395 -53✔ -186✓ x c. Reformulate the balance sheet for all three years. Specifically, compute adjustments to: warranty liabilities, deferred tax assets, and retained earnings. Assume the company's tax rate is 22%. Note: Enter an increase in account balance as positive and a decrease in account balance as negative. Note: Round answer to the nearest dollar, if applicable. Note: Do not round intermediate calculation, if applicable. Two Years Prior Prior Year 1175 Current Year 0 26- x 0 -92- x 0 $ millions Adjustment to warranty liabilities S Adjustment to deferred tax assets Adjustment to retained earnings Reformulating Financial Statements for Warranty Expense Ford Motor Company reported the following information in its current fiscal year financial statements. Use these data to answer the requirements. Warranty Liability $ millions Two Years Prior Prior Year Current Year Beginning balance $4,558 $4,960 $5,296 Payments made during the period (3,286) (3,457) (4,360) Changes in accrual related to warranties issued during the period Changes in accrual related to pre-existing warranties 2,326 2,260 2,584 1,360 1,415 1,758 Foreign currency translation and other 2 118 (141) $4,960 $5,296 $5,137 Ending balance The income statement reports the following additional information. $ millions Two Years Prior Prior Year Current Year Automotive revenues $141,547 $145,653 $148,294 Financial services revenues Total revenues 10,253 $151,800 $156,766 11,113 12,018 $160,312

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter17: Accounting For Notes And Interest

Section: Chapter Questions

Problem 12SPA: ACCRUED INTEREST RECEIVABLE The following is a list of outstanding notes receivable as of December...

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