The following disclosures were provided by Siemens AG in its 2014 annual report:

Product-related expenses

Provisions for estimated costs related to product warranties are recorded in line item Cost of sales at the time

the related sale is recognized, and are established on an individual basis, except for the standard product

business. The estimates reflect historic experience of warranty costs, as well as information regarding prod-

uct failure experienced during construction, installation or testing of products. In the case of new products,

expert opinions and industry data are also taken into consideration in estimating product warranty provisions.

		Provisions
In Millions of	2014	2013
Beginning Balance	3,350	3,405
Additions	1,778	1,544
Usage	(771)	(828)
Reversals	(657)	(683)
Translation differences and other	23	(88)
Ending Balance	3,721	3,350

. The Provision that Siemens reports is an estimated warranty liability. What would constitute

additions to the provision? Prepare a journal entry to record this addition.

b. What constitutes usage of the provision? Besides the provision, what other accounts are

likely to be affected by usage? Prepare a journal entry to record usage of 771 million.

c. Reversals are corrections of previous estimates of warranty obligations. Why would it be

useful to report reversals separately from additions?

d. Siemens reported sales revenue of 71,920 million in 2014 and 73,445 in 2013. Calculate the

ratio of warranty expense to sales for each yea