Question

ted Liabilities Help Save & Exit 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 $15 and its retail selling price is $80 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 $4,800 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 $14,400 cash 29 Replaced 24 razors that were returned under the warranty 31 Recognized warranty expense related to December soles with an adjusting entry 2017 29 razors that were returned under the warranty 17 Replaced 31 Recognized warranty expense related to Jenuary sales with an adjusting entry roblem 11-4A Part 1

Answer 1