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Recording and Analyzing Warranty Accrual and Payment Refer to the excerpt from the Harley-Davidson Inc. warranty reserve financial statement disclosure provided to answer the questions that follow. Product Warranty and Recall The Company currently provides a standard two-year limited warranty on all new motorcycles sold worldwide, except for Japan, where the Company provides a standard three-year limited warranty on all new motorcycles sold. In addition, the Company offers a one-year warranty for Parts & Accessories (P&A). The warranty coverage for the retail customer generally begins when the product is sold to a retail customer. The Company accrues for future warranty claims using an estimated cost based primarily on historical Company claim information. Additionally, the Company has from time-to-time initiated certain voluntary recall campaigns. The Company accrues for the estimated cost associated with voluntary recalls in the period that management approves and commits to the recall. Changes in the Company's warranty and recall liability were as follows (in thousands): 2018 2017 2016 Balance, beginning of period $94,200 $79,482 $74,217 Warranties issued during the period 53,367 57,834 60,215 Settlements made during the period (79,300) (82,554) (99,298) Recalls and changes to pre-existing warranty liabilities 63,473 39,438 44,348 Balance, end of period $131,740 $94,200 $79,482 The liability associated with recalls was $73.3 million, $35.3 million, and $13.6 million at December 31, 2018, 2017, and 2016, respectively. Required Using the financial statement effects template, record separately the 2018 warranty liability transactions relating to the (1) 'Warranties issued during the period," (2) "Recalls and changes to preexisting warranty obligations," and (3) "Settlements made during the period." Note: For each account category, indicate the appropriate account name. Enter "N/A" for any account category that is not used for a given transaction. Note: Indicate a decrease in an account category by including a negative sign with the amount. ($ 000s) Balance Sheet Liabilities Cash Asset + Noncash Assets = Contrib. Capital Earned Capital Revenues Income Statement Expenses 0 ransaction 1. = Net Income 0 0 = 0 0 0 0 = 0 a a 0 = 0 0 0 0 0 = 0 a 0 = 0 0 0 0 - 0 = 0 e e 2. Cash Gain on warranties 3. Interest expense Interest revenue Retained earnings Please ans Warranty payable Warranty expense N/A stion

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