On November 9, 2023, Snowbot Snow Removal began to buy and resell snow blowers for $700 each.

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On November 9, 2023, Snowbot Snow Removal began to buy and resell snow blowers for $700 each. Snowbot uses the perpetual system to account for inventories. The snow blowers are covered under a warranty that requires the company to replace any non-working snow blower within 60 days. When a snow blower is returned, the company simply discards it and sends a new one from inventory to the customer. The company’s cost for a new snow blower is $540. The manufacturer has advised the company to expect warranty costs to equal 20% of the total units sold. These transactions occurred in 2023 and 2024.



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Required1. How much warranty expense should be reported for November and December 2023?2. How much warranty expense should be reported for January 2024?3. What is the balance of the estimated warranty liability as of December 31, 2023?4. What is the balance of the estimated warranty liability as of January 31, 2024?5. Prepare journal entries to record the transactions and adjustments (ignore sales taxes).

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Fundamental Accounting Principles Volume 2

ISBN: 9781260881332

17th Canadian Edition

Authors: Kermit D. Larson, Heidi Dieckmann, John Harris

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