Question

Chapter 9 Problems i Saved 12 Required information The following information applies to the questions displayed below.] Part 5 of 5 1.53 points On October 29, Lobo Co. began operations by purchasing razors for resale. The razors have a 90-day warranty. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $14 and its retail selling price is $70. The company expects warranty costs to equal 6% of dollar sales. The following transactions occurred. Nov. 11 Sold 50 razors for $3,500 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. Dec. 9 Replaced 10 razors that were returned under the warranty. 16 Sold 150 razors for $10,500 cash. 29 Replaced 20 razors that were returned under the warranty. 31 Recognized warranty expense related to December sales with an adjusting entry. 5 Sold 100 razors for $7,000 cash. 17 Replaced 25 razors that were returned under the warranty 31 Recognized warranty expense related to January sales with an adjusting entry. eBook Jan. Print 5. What is the balance of the Estimated Warranty Liability account as of January 31? Estimated warranty liability balance

Answer 1

Answer:

Estimated warranty liability account:
					$
Warranty expenses recognized
Nov. 11 sales		3500*6%			210
Dec. 9 sales		10500*6%			630
Jan 5 sales		7000*6%			420
					1260
Less:
Cost of razors replaced
Dec. 9	10 razors	10*14		140
Dec. 29	20 razors	20*14		280
Jan. 17	25 razors	25*14		350	770
Balance					490