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11. On October 29, Lobo Company began operations by purchasing razors for resale. The razors have a 90-day warranty. When a razor is returned, the
11. On October 29, Lobo Company 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 7% of dollar sales. The following transactions occurred.
November 11 | Sold 70 razors for $4,900 cash. |
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November 30 | Recognized warranty expense related to November sales with an adjusting entry. |
December 9 | Replaced 14 razors that were returned under the warranty. |
December 16 | Sold 210 razors for $14,700 cash. |
December 29 | Replaced 28 razors that were returned under the warranty. |
December 31 | Recognized warranty expense related to December sales with an adjusting entry. |
January 5 | Sold 140 razors for $9,800 cash. |
January 17 | Replaced 33 razors that were returned under the warranty. |
January 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?
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