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

Ford's sales in its automotive sector were $135,782 million in Year 2 and $139,369 million in Year 1. Assume that the total paid on warranty claims during Year 2 was $2,850 million.
a. Illustrate the effects on the accounts and financial statements for the Year 2 product warranty expense.
b. Explain the $859 ($4,786 - $3,927) million increase in the total warranty liability from Year 1 to Year 2.

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December 31, Year 2 Year 1 (in millions) $4,786 $3,927 Product warranty payable