Question

previous information :

warranty expense for november 2016=$216

warranty expense for December 2016=$648

warranty expense for January 2017=$432

Required information Problem 11-4A Warranty expense and liability estimation LO P4 (The following information applies to the questions displayed below.) On October 29, 2016, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. 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 $60 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred. 2016 Nov. 11 Sold 60 razors for $3,600 cash. 30 Recognized warranty expense related to November sales with an adjunting entry Dec. 9 Replaced 12 razors that were returned under the warranty. 16 Sold 180 razors for $10,800 cash. 29 Replaced 24 razors that were returned under the warranty 31 Recognized warranty expense related to December sales with an adjusting entry. To $10,800 cashed under the warran with an adju 2017 Jan. 5 sold 120 razors for $7,200 cash. 17 Replaced 29 razors that were returned under the warranty. 31 Recognised warranty expense related to January sales with an adjusting entry. Problem 11-4A Part 5 5. What is the balance of the Estimated Warranty Liability account as of January 31, 2017? Answer is complete but not entirely corre Estimated warranty labin 432

Answer 1

Solution:

Net sales in Nov = 60 units

Net Sales in December = 180-12-24= 144 units

Total net sales in 2016 =60+144=204 units

Estimated Warranty liability as at 12/31/2016 = 204*60*6%= $734.40