Toyco Inc. is a leading manufacturer of electronic devices. As part of its financial reporting process, the company must estimate warranty reserves to comply with accounting standards. You are assisting with the annual audit and have been tasked with analyzing these estimates and evaluating their impact on the debt and equity cycle.

1. Consider the complexity involved in estimating warranty reserves. Discuss the key factors that can influence these estimates and how they may affect the financial statements of Toyco Inc.
2. Formulate analytical procedures that would help the audit team assess the reasonableness of the warranty reserves.
3. Discuss the potential impact of changes in assumptions, economic conditions, and any other relevant factor on the accuracy of warranty reserves.