Bombardier Inc. specializes in manufacturing transportation products. The company offers warranties on all of its products. Note 2 to Bombardier's financial statements for fiscal year 2011 stated the following:

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

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

	2012	2011	2010
Revenues	17,018	18,597	18,142
Provision for product warranties at year-end	1,016	1,123	1,170

During fiscal year 2012, Bombardier paid $415 million to customers in excange for returned products under the warranty.

1) Compute the amount of warranty expense for fiscal year 2012

2) Prepare journal entries to record both the warranty expense for the year and the payments made under the warranty.

3) Compute the ratio of the warranty liability to revenues for the three years.

4) Has the ratio increased or decreased during the three-year period?

5) Based on the limited information available about the warranty expense and payments in 2012, should Bombardier increase the balance of the warranty liability in the future years?