Bombardier Inc. specializes in manufacturing transportation products (aircraft, railway equipment, snowmobiles, and watercraft). The company offers warranties on all of its products. Note 2 to Bombardiers financial statements for fiscal year 2018 stated the following:

Product warranties typically range from one to five years, except for aircraft structural and bogie warranties that extend up to 20 years.

Selected information from Bombardiers annual reports follows (amounts in millions of U.S. dollars):

During fiscal year 2018, Bombardier paid $410 million to customers in exchange for returned products under the warranty.

Required:

1. Compute the amount of warranty expense for fiscal year 2018. (Enter your answer in millions of dollars.)

2. Prepare journal entries to record both the warranty expense for the year and the payments made under the warranty. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions of dollars.)

3-a. Compute the ratio of the warranty liability to revenues for the three years. (Round percentage answers to 2 decimal places (i.e., 0.1243 should be entered as 12.43).)

3-b. Has the ratio increased or decreased during the three-year period?

(Increased or decreased)

4. Based on the limited information available about the warranty expense and payments in 2018, should Bombardier increase the balance of the warranty liability in future years?

• Yes

• No

Revenues Provision for product warranties at year-end 2018 2017 2016 16,993 18,572 18,117 1,011 1,118 1,165 Warranty expense Journal entry worksheet Record payments to customers in exchange for returned products. Note: Enter debits before credits. General Journal Debit Credit Transaction A Cash Deferred revenue Record en No journal entry required Provision for product warranties View general journal Journal entry worksheet Record entry to recognize warranty expense for the period. Note: Enter debits before credits. General Journal Debit Credit Transaction B Cash Record en Deferred revenue No journal entry required Provision for product warranties View general journal 2018 2017 2016 Ratio of the warranty liability to revenues % % % The ratio from 2016 to 2017, and from 2017 to 2018