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On October 29, 2014, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty
On October 29, 2014, 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 $20 and its retail selling price is $75 in both 2014 and 2015. The manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. The following transactions and events occurred. 2014 Nov. 11 Sold 105 razors for $7,875 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. Dec. 9 Replaced 15 razors that were returned under the warranty. 16 Sold 220 razors for $16,500 cash. 29 Rep aced 30 razors that were returned under the warranty 31 Recognized warranty expense related to December sales with an adjusting entry. 2015 Jan. 5 Sold 150 razors for $11,250 cash 17 Replaced 50 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry
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