Question

Required information [The following information applies to the questions displayed below) 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 $20 and its retail selling price is $75. The company expects warranty costs to equal 8% of dollar sales. The following transactions occurred. Nov. 11 Sold 105 razors for $7,875 cals. 30 Recognized warranty expense related to November sales with an adjusting entry. Dec. 9 Replaced 15 razors that were returned under the warranty. 16 Sold 220 razors for $16,500 cash. 29 Replaced 30 razors that were returned under the warranty 31 Recognized warranty expense related to December soles with an adjusting entry. 5 Sold 150 razors for $11,250 cash. 17 Replaced 50 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry. Jan. 1 Pranare lournal entries to record above transactions and adjustments

Answer 1

Answer:

1.

Date	Account Title	Debit	Credit
11-Nov	Cash (105*$75)	$          7875
	Sales		$           7875
	(To record sales revenue)
11-Nov	Cost of Goods Sold (105*$20)	$             2100
	Inventory		$              2100
	(To record cost of goods sold )
30-Nov	Warranty Expense (7875*8%)	$             630
	Estimated Warranty Liability		$              630
	(To record warranty expense at 8% of November sales )
9-Dec	Estimated Warranty Liability (15*20)	$             300
	Inventory		$              300
	(To record replacement of 15 razors that were replaced under the warranty)
16-Dec	Cash (220*75)	$        16500
	Sales		$         16500
	(To record sales revenue)
16-Dec	Cost of Goods Sold (220*20)	$          4400
	Inventory		$           4400
	(To record cost of goods sold )
29-Dec	Estimated Warranty Liability (30*20)	$             600
	Inventory		$              600
	(To record replacement of 30 razors that were replaced under the warranty)
31-Dec	Warranty Expense (16500*8%)	$             1320
	Estimated Warranty Liability		$              1320
	(To record warranty expense at 8% of December sales )
5-Jan	Cash ($75*150)	$          11250
	Sales		$           11250
	(To record sales revenue)
5-Jan	Cost of Goods Sold (150*20)	$          3000
	Inventory		$           3000
	(To record cost of goods sold )
17-Jan	Estimated Warranty Liability (50*20)	$             1000
	Inventory		$              1000
	(To record replacement of 50 razors that were replaced under the warranty)
31-Jan	Warranty Expense (11250*8%)	$             900
	Estimated Warranty Liability		$              900
	(To record warranty expense at 8% of January sales )

2.

Warranty Expenses reported for November and December
Warranty Expenses reported for November	$             630
Warranty Expenses reported for December	$             1320

3.

Warranty Expenses reported for January

$             900

4.

Balance of estimated warranty liability account as of December 31
Warranty Expenses reported for November	$             630
Warranty Expenses reported for December	$             1320
Less: Cost of replacing items in December	$            (900)
Estimated warranty liability balance as of December 31	$             1050

5.

Balance of estimated warranty liability account as of January 31
Beginning balance	$             1050
Warranty Expenses reported for January	$             900
Less: Cost of replacing items in January	$            (1000)
Estimated warranty liability balance as of January 31	$             950