Tableau DA 9-3: Mini-Case, Analyzing warranty liabilities LO P4
1. Looking at past years, does it appear that Arctica has usually underestimated or overestimated its warranty liabilities?
2. How would we suggest Arctica change its estimates of warranty liabilities in future periods?
3. Management tells us that Arctica plans to keep estimated warranty expense percentages to a minimum next year. Why might management want to keep these percentages low?
4. Alternatively, assume management informs us that Arctica had a great year and has very high net income. However, management is now concerned about high taxes, which are calculated as a percentage of net income. What might management try to do to lower Arctica’s taxes?

Question 1 Options:
a. Neither overestimated nor underestimated
b. Overestimated
c. Underestimated

Question 2 Options:
a. Decrease warranty estimate percentage
b. Increase warranty estimate percentage
c. Keep estimate percentages the same
d. No longer estimate warranty expenses

Question 3 Options:
a. To decrease net income to show a "smooth" earnings pattern
b. To increase management bonus that is based on net income.
c. To limit the amount of parts needing to be purchased.
d. To limit the number of warranty claims

Question 4 Options:
a. Decrease warranty estimate percentages
b. Increase warranty estimate percentages
c. Limit parts purchased for warranty claims
d. Limit the number of warranty claims

I got underestimated for the first question. I need help with the others. Much appreciated.