Reformulating Financial Statements For Warranty Expense

Income statement data for Whirlpool Industries from the companys 2016 financial statements follow. Use these data to reformulate the income statement for 2014, 2015, and 2016 under the assumption that warranty expense is a constant percentage of revenue across all three years. Specifically, compute the adjustments to: warranty expense, income tax expense, and net income. The companys tax rate is 30%.

12 Months Ended ($ millions)		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Net sales		$23,928	$24,101	$23,082
Warranty expense		366	610	372

Compute the average warranty expense to net sales rate over the past three years.

Round answer to two decimal places (ex: 0.02345 = 2.35%)

Answer

%

Using your rounded answer, compute the adjusted warranty expense for each year.

• Round answers to one decimal place.

• Use a negative sign to indicate if the adjustment decreases an account balance.

Income Statements Adjustments			2016	2015	2014
Adjusted warranty expense
Adjustment required to warranty expense
Income tax expense
Net Income