On October 29, 2016, Lobo Co. began operations by purchasingrazors for resale. Lobo uses the perpetual inventory method. Therazors have a 90-day warranty that requires the company to replaceany nonworking razor. When a razor is returned, the companydiscards it and mails a new one from Merchandise Inventory to thecustomer. The company's cost per new razor is $14 and its retailselling price is $70 in both 2016 and 2017. The manufacturer hasadvised the company to expect warranty costs to equal 8% of dollarsales. The following transactions and events occurred.
2016
| Nov. | | 11 | | Sold 80 razors for $5,600 cash. |
| | 30 | | Recognized warranty expense related to November sales with anadjusting entry. |
| Dec. | | 9 | | Replaced 16 razors that were returned under the warranty. |
| | 16 | | Sold 240 razors for $16,800 cash. |
| | 29 | | Replaced 32 razors that were returned under the warranty. |
| | 31 | | Recognized warranty expense related to December sales with anadjusting entry. |
2017
| Jan. | | 5 | | Sold 160 razors for $11,200 cash. |
| | 17 | | Replaced 37 razors that were returned under the warranty. |
| | 31 | | Recognized warranty expense related to January sales with anadjusting entry. |
1.1 Prepare journal entries to record abovetransactions and adjustments for 2016.
1.2 Prepare journal entries to record abovetransactions and adjustments for 2017.
