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Required information The following information applies to the questions displayed below On October 29, 2016, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. 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 $60 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. The following transactions and events occurred. 2016 Nov. 11 Sold 60 razors for $3,600 cash 30 Recognized warranty expense related to November sales with an adjusting entry. Dec. 9 Replaced 12 razors that were returned under the warranty. 16 Sold 180 razors for $10,800 cash. 29 Replaced 24 razors that were returned under the warranty. 31 Recognized warranty expense related to December sales with an adjusting entry 2017 Jan. 5 Sold 120 razors for $7,200 cash. 17 Replaced 29 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry. 1.1 Prepare journal entries to record above transactions and adjustments for 2016. Journal entry worksheet Record the sales revenue of 60 razors for $3,600 cash Note: Enter debits before credits. Date General Journal Debit Credit Nov 11 Record entry Clear entry View general journal Journal entry worksheet Record the cost of goods sold for s0 razors. Note: Enter debits before credits. Date General Journal Debit Credit Nov 11 Record entry Clear entry View general journal Journal entry worksheet 2 4 7 Record the estimated warranty expense at 8% of November sales Note: Enter debits before credits. Date General Journal Debit Credit Nov 30 Record entry Clear entry View general journal Journal entry worksheet 4 7 Record the replacement of 12 razors that were returned under the warranty. Note: Enter debits before credits Date General Journal Debit Credit Dec 09 Record entry Clear entry View general journal Journal entry worksheet 4 7 Record the sales revenue of 180 razors for $10,800 cash. Note: Enter debits before credits Date General Journal Debit Credit Dec 16 Record entry Clear entry View general journal Journal entry worksheet 4 7 Record the cost of goods sold for 180 razors. Note: Enter debits before credits. Date General Journal Debit Credit Dec 16 Record entry Clear entry View general journal Journal entry worksheet Record the replacement of 24 razors that were returned under the warranty. Note: Enter debits before credits. Date General Journal Debit Credit Dec 29 Record entry Clear entry View general journal Journal entry worksheet Record the estimated warranty expense at 8% of December sales. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31 Record entry Clear entry View general journal 1.2 Prepare journal entries to record above transactions and adjustments for 2017. View transaction list Journal entry worksheet 4 Record the sales revenue of 120 razors for $7,200 cash. Note: Enter debits before credits. Date General Journal Debit Credit Jan 05 Record entry Clear entry View general journal Journal entry worksheet 4 Record the cost of goods sold for 120 razors Note: Enter debits before credits. Date General Journal Debit Credit Jan 05 Record entry Clear entry View general journal Journal entry worksheet 2 4 Record the replacement of 29 razors that were returned under the warranty Note: Enter debits before credits. Date General Journal Debit Credit Jan 17 Record entry Clear entry View general journal Journal entry worksheet 4 Record the adjusting entry for warranty expense for the month of January 2017. Note: Enter debits before credits. Date General Journal Debit Credit Jan 31 Record entry Clear entry View general journal 2. How much warranty expense is reported for November 2016 and for December 2016? Warranty expense for November 2016 Warranty expense for December 2016 3. How much warranty expense is reported for January 2017? Warranty expense 4. What is the balance of the Estimated Warranty Liability account as of December 31, 2016? Estimated warranty liability balance 5. What is the balance of the Estimated Warranty Liability account as of January 31, 2017? Estimated warranty liability balance
