International Business Machines (IBM) is a leading provider of computer products and services. The company is known for its hardware products but has focused on providing information technology services in recent years. IBM provides standard warranties and extended warranties with the sale of its products. The company's note on significant accounting policies is as follows: The company offers warranties for its hardware products that generally range up to three years, with the majority being either one or three years. Estimated costs for warranty terms standard to the deliverable are recognized when revenue is recorded for the related deliverable. The company estimates its warranty costs standard to the deliverable based on historical warranty claim experience and estimates of future spending, and applies this estimate to the revenue stream for products under warranty. subsequently recognized on a straight-line basis over the delivery period. Revenue from separately priced extended warranty contracts is initially recorded as deferred income and subsequently recognized on a straight-line basis over the delivery period. Selected information related to warranties provided by IBM follows (in millions of U.S. dollars): 2015 2014 2013 Net revenues $82,641 $93,693 $99,267 Standard warranty liability, end of year 271 287 500 Settlements made during the year 286 388 477 Extended warranty deferred revenue, end of year 628 626 669 Additions to extended warranty deferred revenue during the year 376 388 395 Required: 1. Compute the amount of warranty expense for 2014 and 2015. (Enter your answers in millions of dollars.) 2015 2014 Warranty expense 2. Prepare journal entries to record both the warranty expense for 2015 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.) View transaction list View journal entry worksheet Transaction Debit Credit No 1 1 General Journal Warranty expense Estimated warranty liability 2. 2 Estimated warranty liability Cash 3-a. Compute the ratio of the warranty expense to net revenues for the three years. The Standard warranty liability had a balance of $484 at the beginning of 2013. (Round percentage answers to 2 decimal places (i.e., 0.1243 should be entered as 12.43).) 2015 2014 2013 Warranty expenseet sales % % 3-b. Has the ratio increased or decreased during the three-year period? (Enter your answers in millions of dollars.) The warranty expense decreased from in 2013 to in 2014 and in 2015 5-a. Compute the extended warranty revenue recognized during 2014 and 2015. (Enter your answers in millions of dollars.) 2015 2014 Warranty revenue 5-b. Prepare the journal entry to record the revenue recognized in 2015. (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.) View transaction list Journal entry worksheet 1 Record to the recognize revenue related to extended warranties. Note: Enter debits before credits. Transaction Debit Credit 1 General Journal Extended warranty deferred revenue Extended warranty revenue Record entry Clear entry View general journal