60.1K

Verified Solution

Link Copied!

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 $14 and its retail selling price is $70. The company expects warranty costs to equal 5% of dollar sales. The following transactions occurred.

Nov.		11		Sold 70 razors for $4,900 cash.
		30		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 $14,700 cash.
		29		Replaced 28 razors that were returned under the warranty.
		31		Recognized warranty expense related to December sales with an adjusting entry.
Jan.		5		Sold 140 razors for $9,800 cash.
		17		Replaced 33 razors that were returned under the warranty.
		31		Recognized warranty expense related to January sales with an adjusting entry.

2. How much warranty expense is reported for November and December?

[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 $14 and its retail selling price is $70. The company expects warranty costs to equal 5% of dollar sales. The following transactions occurred.

Nov.		11		Sold 70 razors for $4,900 cash.
		30		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 $14,700 cash.
		29		Replaced 28 razors that were returned under the warranty.
		31		Recognized warranty expense related to December sales with an adjusting entry.
Jan.		5		Sold 140 razors for $9,800 cash.
		17		Replaced 33 razors that were returned under the warranty.
		31		Recognized warranty expense related to January sales with an adjusting entry.

3. How much warranty expense is reported for January?

[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 $14 and its retail selling price is $70. The company expects warranty costs to equal 5% of dollar sales. The following transactions occurred.

Nov.		11		Sold 70 razors for $4,900 cash.
		30		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 $14,700 cash.
		29		Replaced 28 razors that were returned under the warranty.
		31		Recognized warranty expense related to December sales with an adjusting entry.
Jan.		5		Sold 140 razors for $9,800 cash.
		17		Replaced 33 razors that were returned under the warranty.
		31		Recognized warranty expense related to January sales with an adjusting entry.

4. What is the balance of the Estimated Warranty Liability account as of December 31?

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 $14 and its retail selling price is $70. The company expects warranty costs to equal 5% of dollar sales. The following transactions occurred.

Nov.		11		Sold 70 razors for $4,900 cash.
		30		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 $14,700 cash.
		29		Replaced 28 razors that were returned under the warranty.
		31		Recognized warranty expense related to December sales with an adjusting entry.
Jan.		5		Sold 140 razors for $9,800 cash.
		17		Replaced 33 razors that were returned under the warranty.
		31		Recognized warranty expense related to January sales with an adjusting entry.

5. What is the balance of the Estimated Warranty Liability account as of January 31?

Answer & Explanation Solved by verified expert

See Answer