Question

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. Jan. 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. Prepare journal entries to record above transactions and adjustments. View transaction list Journal entry worksheet 2 3 4 5 6 7 8 ... 12 Record the sales revenue of 50 razors for $3,500 cash. Note: Enter debits before credits. General Journal Debit Credit Date Nov 11 Record entry Clear entry View general journal

Answer 1

Answer:

No.	Date	General Journal	Debit	Credit
1	Nov. 11	Cash	$3500
		Sales		$3500
2	Nov. 11	Cost of Goods Sold                          [Units sold x Cost per unit = 50 units x $14]	$700
		Merchandise inventory		$700
3	Nov. 30	Warranty Expense                                  [Sales x 6% = $3500 x 6%]	$210
		Estimated Warranty Liability		$210
4	Dec. 9	Estimated Warranty Liability                [Units replaces x Cost per unit = 10 units x $14]	$140
		Merchandise inventory		$140
5	Dec. 16	Cash	$10500
		Sales		$10500
6	Dec. 16	Cost of Goods Sold                          [Units sold x Cost per unit = 150 units x $14]	$2100
		Merchandise inventory		$2100
7	Dec. 29	Estimated Warranty Liability             [Units replaced x Cost per unit = 20 units x $14]	$280
		Merchandise inventory		$280
8	Dec. 31	Warranty Expense                                 [Sales x 6% = $10500 x 6%]	$630
		Estimated Warranty Liability		$630
No.	Date	General Journal	Debit	Credit
1	Jan. 5	Cash	$7000
		Sales		$7000
2	Jan. 5	Cost of Goods Sold                          [Units sold x Cost per unit = 100 units x $14]	$1400
		Merchandise inventory		$1400
3	Jan. 17	Estimated Warranty Liability              [Units replaced x Cost per unit = 25 units x $14]	$350
		Merchandise inventory		$350
4	Jan. 31	Warranty Expense                               [Sales x 6% = $7000 x 6%]	$420
		Estimated Warranty Liability		$420