On October Lobo Company began operations by purchasing razors for resale. The razors have a 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 $ and its retail selling price is $ The company expects warranty costs to equal of dollar sales. The following transactions occurred.
November Sold razors for $ cash.
November Recognized warranty expense related to November sales with an adjusting entry.
December Replaced razors that were returned under the warranty.
December Sold razors for $ cash.
December Replaced razors that were returned under the warranty.
December Recognized warranty expense related to December sales with an adjusting entry.
January Sold razors for $ cash.
January Replaced razors that were returned under the warranty.
January Recognized warranty expense related to January sales with an adjusting entry.
Required:
Prepare journal entries to record above transactions and adjustments.
