Question

27 Required information (The following information applies to the questions displayed below) Part 1 of 5 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 $80 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 7% of dollar sales. The following transactions and events occurred. (8 00:4116 2016 Nov. 11 Sold 70 razors for $5,600 cash. 3e Recognized warranty expense related to November sales with an adjusting entry. Dec. 9 Replaced 14 razors that were returned under the warranty. 16 Sold 210 razors for $16,800 cash. 29 Replaced 25 razors that were returned under the warranty. 31 Recognized warranty expense related to December sales with an adjusting entry. 2017 Jan. 5 Sold 148 razors for $11,280 cash. 17 Replaced 33 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry. 1.1 Prepare journal entries to record above transactions and adjustments for 2016. View transaction list View journal entry worksheet No General Journal Debit Credit Date Nov 11 Cash

Answer 1

1.1
Date	General Journal	Debit	Credit
11-Nov	Cash	5,600
	Sales		5,600
11-Nov	Cost of goods sold	980		=70*14
	Merchandise inventory		980
30-Nov	Warranty expense	392		=5600*7%
	Estimated warranty liability		392
9-Dec	Estimated warranty liability	196		=14*14
	Merchandise inventory		196
16-Dec	Cash	16,800
	Sales		16,800
16-Dec	Cost of goods sold	2,940		=210*14
	Merchandise inventory		2,940
29-Dec	Estimated warranty liability	392		=28*14
	Merchandise inventory		392
31-Dec	Warranty expense	1,176		=16800*7%
	Estimated warranty liability		1,176
1.2
Date	General Journal	Debit	Credit
5-Jan	Cash	11,200
	Sales		11,200
5-Jan	Cost of goods sold	1,960		=140*14
	Merchandise inventory		1,960
17-Jan	Estimated warranty liability	462		=33*14
	Merchandise inventory		462
31-Jan	Warranty expense	784		=11200*7%
	Estimated warranty liability		784