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P9-6 Defining and Analyzing Changes in Current Llablilities LO9-1 International Buriness Machines (IAM) is a loating provider of computer products and services. The compary is lenown for its hardware products but has focused on praviding informatian technoiogy services in recent yoars. aM provies standard warrant os and extonded warrantes with the saie of its products. The compary's note on significant accaunting policies is as sollows: The company offers warranties for its hardware products that generally range up to three years, with the majority beng olther one. of three years. Eabmated costs for standard warranty terms are recognized witen rewenus is recorded for the related product. The compary eatimates its warranty costs standord to the product bosind on historical. warranty clam ciperience and astirates of future spending, and apples this estimate ta the revenue stream for products undor warranty Est inated future costa for wartanties: applicable to revemue rocognized in the current period are charged to cast of sales. The warramy lability is reviewed quarterty to verty that it property roflects the remaining abigation based on the anticipated erpenditures ower the balsece of the oblipation periad: Revenue from extended wanranty contracts is intially recorded as detorisd incame and subsequenty recagitaed on as straighi tine bosis over the dolvory period becauso the compary is providing a service of standing reney to provide servicas ower such sarm. Selected information related to wamantes provided by IliM follown tin milions of U.S dolarsi: Required: t. Computo the aenount of warranty expenso for 2017 and 2018 . (Enter your answiefs in millins af dollars.) 2. Piepare joumal entrias ta record both the warranty experse tiar 2018 and the parments made undat the warranty ouring tha yeat iff no entry le repuleed for a traneactionievent, select "No journat entry requirnd" in the fient account field. Enter your answats in milisines of deliars, ) Journal entry worksheet Reoked to regtoniae tre waranty acomise fic the year. 3.a. Compute the rato of the warranty exponse to ret revenues for the three yesrs. The Starndord wnmrntyliability had a balance of 36. Has the ratio increased or decreased during the three yoat period? (Enter your a nswers in enalitins uf doilaru.) 4. Based on the limited information avalable about the wntranty expense and setsements duating these three yoars, should iam reduce the ratio of the waeranty expense to net saios in future yeats? Yes No 5.a. Compute the extended wananay revenue recogntes durieg 2017 and 2018 , (Enter your a nswers in mililons of dotianz) foumal enty requlaed" in the first account field. Enter your answers in milifons of dotlorn.] 3-b. Has the ratio increased or decreased during the three-year period? (Enter your answers in millions of dollars.) 4. Based on the limited information available about the warranty expense and settlements during these three years, should IBM reduce the ratio of the warranty expense to net sales in future years? thes No 5-a. Compute the extended warranty revenue recognized during 2017 and 2018. (Enter your answers in millions of dollars.) 5-b. Prepare the journal entry to record the revenue recognized in 2018. (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.) Required: 1. Compute the amount of warranty expense for 2017 and 2018. (Enter your answers in millions of dollars.) 2. Prepare journal entries to record both the warranty expense for 2018 and the payments made under the warranty during the year. (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.) Journal entry worksheet 2 Record to recognize the warranty expense for the year. Nobe: Enter debles belorn areden. 3-a. Compute the ratio of the warranty expense to net revenues for the three years. The Standard warranty liability had a balance of $201 at the beginning of 2016 . (Round percentage answers to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) Required: 1. Compute the amount of warranty expense for 2017 and 2018. (Enter your answers in millions of dollars.)