Refer to the discussion of and excerpt from the Harley Davidson Inc waranty reserve on page 7-6 to answer the following questions.

A) Using the financial statement effects template, record seperately the 2015 warranty liability transactions, relating to 1) " Warranties issued during the period" 2) " Recalls and changes to preexisting warranty obligations" and 3) " Settlements made during the period"

B) Does the level of Harley Davidsons warranty accrual appear to be reasoable?

ablty and related expense are typically important items for manufactur the financial statements. Harley-Davidson's warranty footnote in its 2015 annual the warranty panies, information the footnotes to the fin is an example Estimated warranty costs are reserved for motorcycles, motorcycle parts and Product War nssories at the time of sale. The warranty reserve is based upon historical Company in combination with other known factors that may affect future warranty claims. The tes its warranty estimates quarterly to ensure that the warranty reserves are based rrent information available.. . The Company maintains reserves for future warranty ng an estimated cost, which are based primarily on historical Company claim information. the Company has from time to time initiated certain voluntary recall campaigns. The es for all estimated costs associated with recalls in the period that management c claim data used on the most claims Company approves and commits to the recall. Changes in the Company's warranty and recall liability were as follows (in thousands) 2015 2014 $69,250 $64,120 $60,263 59,259 60,331 59,022 (96,529 (74,262) (64,462) 2013 Balance, beginning of period Warranties issued during the period Settlements made during the period Recalls and changes to pre-existing warranty liabilities 42,237 19,061 9,297 $74,217 $69,250 $64,120 At the beginning of 2015, Harley-Davidson reported a reserve of $69.250 for estimated product warranty and safety recall costs (all $ in thousands for this discussion). During 2015, the company ded $$9,259 to the reserve relating to warranties on products sold in 2015 and another $42,237 to rcognize the estimated liability for product recalls and changes to pre-existing warranty liabilities. is second accrual reflects changes in estimates for costs to repair or replace products sold in p eriods. As a result of these two accru S$9,259+$42,237) in its 2015 income statement. als, Harley-Davidson recognized an expense of $101,496 During 2015 th pai stomers for refunds, wages paid to employees who repair the motorcycles, and the cost n repairs. It is important to understand that only the increase in the liability resulting l waccruals (S101,496) impacts the income statement, reducing income through addi- xpense. Payments made to settle warranty claims do not affect current-period income; e company paid out $96,529 to settle warranty claims. The settlements include cash id to cu used i from additional rely reduce the pre-existing liability