Case: Transaction Analysis of BorgWarner, Inc.

BorgWarner, Inc. is a supplier of engineered systems and components, primarily for automotive
powertrain applications. The Company's products are manufactured and sold worldwide,
primarily to original equipment manufacturers of passenger cars, sport utility vehicles, and light trucks.
It is one of the 25 largest automotive suppliers in the world, and headquarters is in Auburn Hills, MI.

Please refer to the 2021 BorgWarner, Inc. financial statements, the income statement is on
page 62 of the 10k, the balance sheet page 61, and the statements of equity is on page 65.

Required:
The financial statement worksheets have been preformatted for your convenience.
1) On the financial statement worksheets, enter the original financial statement account balances.
Be sure that any totals or subtotals are an excel formula. On the statement of operations these
line items are Gross profit, Operating income, Earnings before income taxes and noncontrolling
interest, Net earnings, and Net earnings attributable to BorgWarner Inc. On the statement of
retained earnings a formula is used for Balance, December 31, 2021, and on the balance sheet
the line items are Total current assets, Total assets, Total current liabilities, Total liabilities,
Total BorgWarner Inc. stockholders' equity, Total equity, and Total liabilities and equity.
2) Sum across and copy and paste across transactions a - h so there are updated totals after recording
the transactions. Format the adjusted amounts as the original financial statement
numbers are formatted (I suggest using the format painter).
3) Create a formula in Net earnings for each transaction on the statement of retained earnings that will
capture all items that effect net income on the statement of operations. This formula must include
the line items Net sales, Cost of sales, Selling general and administrative, Restructuring expense,
Other operating expense (income), Equity in affiliates' earnings, Unrealized loss (gain) on equity
securities, Interest expense, Other postretirement (income) expense, Provision for income taxes,
and Net earnings attrubutable to the noncontrolling interest.
4) Link any changes in retained earnings to the retained earnings line item on the balance sheet.
5) When finished, double check format. Look for any page break problems and correct accordingly.
6) Record the transactions below.

Transactions (amounts in $millions):

a) Purchased inventories, on account, terms 3/10, n/45, $380.
b) Sales of inventories, on account, terms 4/10, n/30, $860. Cost of these inventories was $500.
c) Merchandise returned to BorgWarner, $200 cost and $530 sales price. This merchandise
was sold on account and has not yet been paid for by customers.
d) Inventories purchased by BorgWarner, $120, were found to be defective and returned to vendors. Cash
had been paid for these inventories, and cash was refunded.
e) Customers pay BorgWarner for the sales in (b), 8 days after the sales were made.
f) BorgWarner pays for the inventories purchased in (a), 6 days after the purchase was made. Please
remember that for inventories purchased, the discount is recorded as a reduction of inventory.
g) BorgWarner returned inventories to vendors, $110. This merchandise had been purchased on account,
and no payments have yet been made on these purchases.
h) Declared and paid an additional $130 cash dividend. Be sure to record this in Dividends declared
in the statement of retained earnings. If linked correctly it will flow through to retained earnings
on the balance sheet.
 BORGWARNER INC.
STATEMENT OF OPERATIONS
Year ended December 31, 2021
(Amounts in $millions) a b c d e f g h Updated
Net sales $ 14,838 860 (530) (34) $ 15,134
Cost of sales 11,983 500 (200) 12,283
Gross profit 2,855 2,851
Selling, general and administrative 1,460 1,460
Restructuring expense 163 163
Other operating expense (income) net 81 81
Operating income 1,151 1,147
Equity in affiliates' earnings, net of tax (48) (48)
Unrealized loss (gain) on equity securities 362 362
Interest expense, net 93 93
Other postretirement (income) expense (45) (45)
Earnings before income taxes and noncontrolling interest 789 785
Provision for income taxes 150 150
Net earnings 639 635
Net earnings attributable to the noncontrolling interest, net of tax 102 102
Net earnings attributable to BorgWarner Inc. $ 537 $ 533

BORGWARNER INC.
STATEMENT OF RETAINED EARNINGS
Year ended December 31, 2021
Balance, December 31, 2020 $ 6,296 $ 6,296
Dividends declared (162) (130) (292)
Net earnings 537 0 360 (330) 0 (34) 0 0 0 533
Balance, December 31, 2021 $ 6,671 $ 6,537
 BORGWARNER INC.
BALANCE SHEET
December 31, 2021
(amounts in $millions)

ASSETS a b c d e f g h Updated
Cash and cash equivalents $ 1,841 120 826 (369) (130) $ 2,288
Restricted cash 3 3
Receivables, net 2,898 860 (530) (860) 2,368
Inventories, net 1,534 380 (500) 200 (120) (11) (110) 1,373
prepayments and other current assets 321 321
Total current assets 6,597 6,353
Property, plant and equipment, net 4,395 4,395
Investments and long-term receivables 530 530
Goodwill 3,279 3,279
Other intangibles, net 1,091 1,091
Other noncurrent assets 683 683
Total assets $ 16,575 $ 16,331

LIABILITIES AND EQUITY

Notes payable and other short-term debt $ 66 $ 66
Accounts payable 2,276 380 (380) (110) 2,166
Other current liabilities 1,456 1,456
Total current liabilities 3,798 3,688
Long-term debt 4,261 4,261
Retirement-related liabilities 290 290
Other non-current liabilities 964 964
Total liabilities 9,313 9,203

Common stock, $0.01 par value 3 3

Capital in excess of par value 2,637 2,637
Retained earnings 6,671 0 360 (330) 0 (34) 0 0 (130) 6,537
Accumulated other comprehensive loss (551) (551)
Common stock held in treasury, at cost (1,812) (1,812)
Total BorgWarner Inc. stockholders' equity 6,948 6,814
Noncontrolling interest 314 314
Total equity 7,262 7,128
Total liabilities and equity $ 16,575 $ 16,331