IThe following information applies to the questions displayed belowj On October 29, 2012,...
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IThe following information applies to the questions displayed belowj On October 29, 2012, 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 $70 in both 2012 and 2013. The manufacturer has advised the company to expect warranty costs to equal 5% of dollar sales. The following transactions and events occurred 2012 Nov. 11 Sold 60 razors for $4.200 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 $12,600 cash. 29 Replaced 24 razors that were returned under the warranty 31 Recognized warranty expense related to December sales with an adjusting entry. 2013 Jan 5 Sold 120 razors for $8,400 cash. 17 Replaced 29 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry
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