1. The computation of the adjustments to warranty expense, income tax expense, and net income and the reformulation of the income statement for 2014, 2015, and 2016 for Whirlpool Industries are as follows:
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
Taxable income $23,562 $23,491 $22,710
Tax expenses (30%) $7,069 $7,047 $6,813
Net income $16,493 $16,444 $15,897
2. The computation of the average warranty expense to net sales rate over the past three years is as follows:
12 Months Ended ($ millions) Dec. 31, 2016 Dec. 31, 2015 Dec. 31, 2014
Net sales $23,928 $24,101 $23,082
Warranty expense 366 610 372
Warranty expenses to
net sales rate 1.5296% 2.5310% 1.6116%
Average warranty expenses to net sales rate = 1.89% (5.6722/3)
<h3>Data and Calculations:</h3>
12 Months Ended ($ millions) Dec. 31, 2016 Dec. 31, 2015 Dec. 31, 2014
Net sales $23,928 $24,101 $23,082
Warranty expense 366 610 372
Warranty expenses to
net sales rate 1.5296% 2.5310% 1.6116%
Average warranty expenses to net sales rate = 1.89% (5.6722/3)
Thus, the average warranty expense to net sales rate over the past three years is <u>1.89%</u>.
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