Question

Please explain step by step.

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 $13 and its retail selling price is $70. The company expects warranty costs to equal 8% of dollar sales. The following transactions occurred. Nov. 11 Sold 60 razors for $4,200 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. Dec. 9 Replaced 12 razors that were returned under the warranty. 16 Sold 180 razors for $12,600 cash. 29 Replaced 24 razors that were returned under the warranty. 31 Recognized warranty expense related to December sales with an adjusting entry. Jan. 5 Sold 120 razors for $8,400 cash. 17 Replaced 29 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry. Problem 9-4A Part 1 1. 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 60 razors for $4,200 cash.

Answer 1

No.	Date	General Journal	Debit	Credit
1	Nov. 11	Cash	$4,200
		Sales		$4,200
2	Nov. 11	Cost of Goods Sold                          [Units sold x Cost per unit = 60 units x $13]	$780
		Merchandise inventory		$780
3	Nov. 30	Warranty Expense                                  [Sales x 8% = $4,200 x 8%]	$336
		Estimated Warranty Liability		$336
4	Dec. 9	Estimated Warranty Liability                [Units replaces x Cost per unit = 12 units x $13]	$156
		Merchandise inventory		$156
5	Dec. 16	Cash	$12,600
		Sales		$12,600
6	Dec. 16	Cost of Goods Sold                          [Units sold x Cost per unit = 180 units x $13]	$2,340
		Merchandise inventory		$2,340
7	Dec. 29	Estimated Warranty Liability             [Units replaced x Cost per unit = 24 units x $13]	$312
		Merchandise inventory		$312
8	Dec. 31	Warranty Expense                                 [Sales x 8% = $12,600 x 8%]	$1,008
		Estimated Warranty Liability		$1,008
No.	Date	General Journal	Debit	Credit
1	Jan. 5	Cash	$8,400
		Sales		$8,400
2	Jan. 5	Cost of Goods Sold                          [Units sold x Cost per unit = 120 units x $13]	$1,560
		Merchandise inventory		$1,560
3	Jan. 17	Estimated Warranty Liability              [Units replaced x Cost per unit = 29 units x $13]	$377
		Merchandise inventory		$377
4	Jan. 31	Warranty Expense                               [Sales x 8% = $8,400 x 8%]	$672
		Estimated Warranty Liability		$672