Question

Chapter 9 Problems i Saved 11 Required information Part 4 of 5 The following information applies to the questions displayed below.] 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. 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. eBook Print 4. What is the balance of the Estimated Warranty Liability account as of December 31? Estimated warranty liability balance

Answer 1

Date	Transaction	Sales
Nov. 11	Sold 50 razors	3500	a
Dec. 16	Sold 150 razors	10500	b
Total sales till December 31		14000	c = a + b
Warranty liability recorded @ 6%		840	d = c x 6%
Dec. 9	Replaced 10 razors	140	e
Dec. 29	Replaced 20 razors	280	f
Balance of Estimated Warranty Liability on December 31		420	g = d - e - f

Therefore, Estimated Warranty Liability as of December 31 is $420.

Answer 2