Accounting Practice Problem 4

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.

Check my work View Required information 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 rates for $14,700 cash. 29 Replaced 28 rarors 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 )) Farors 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? Warranty expense for November Warranty expense for December Required information (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. 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 rators 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. cors that cash under the wa What is the balance of the Estimated Warranty Liability account as of December 31? stimated warranty liability balance Check my work [The following information applies to the questions displayed below.) Shown here are condensed income statements for two different companies (assume no income taxes). Miller Company Sales $1,500,000 Variable expenses (808) 1,200,000 Income before interest Interest expense (fixed) 64,000 Net income $ 236,000 Weaver Company Sales Variable expenses (608) Income before interest Interest expense (fixed) Net income $1,500,000 900,000 600,000 364,000 $ 236,000 . What happens to each company's het income if sales increase by 20%. (Round your answers to nearest whole percent.) Net income Company Miller Co. Veaver Co. Check my work Required information The following information applies to the questions displayed below. Shown here are condensed income statements for two different companies (assume no income taxes). Miller Company Sales $1,500,000 Variable expenses (801) 1,200,000 Income before interest 300,000 Interest expense (fixed) 64,000 Net Income $ 236,000 Weaver Company Sales Variable expenses (608) Income before interest Interest expense (fixed) Net Income $1,500,000 900,000 600,000 364,000 $ 236,000 4. What happens to each company's net income if sales decrease by 10%? (Round your answers to nearest whole percent.) Net Income Company Miller Co. Weaver Co. The following items appear on the balance sheet of a company with a one-year operating cycle. Identify the proper classification of each item as follows: C if it is a current liability, Lif it is a long-term liability, or Nif it is not a liability. Classification 1. Uneamed revenues to be earned over next 3 months) 2. Employee Federal Income Taxes Payable 3. Employee Union Dues Payable 4. Notes payable (due in 13 to 24 months). 5. FUTA taxes payable. 6. Sales taxes payable. 7. Interest payable (due in 90 days) 8. Notes payable (due in 120 days) 9. Warranty liability (6 months of coverage) 10. Machinery (expected life of 4 years)