Question
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
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 $16 and its retail selling price is $90. The company expects warranty costs to equal 9% of dollar sales. The following transactions occurred.
November 11Sold 50 razors for $4,500 cash.November 30Recognized warranty expense related to November sales with an adjusting entry.December 9Replaced 10 razors that were returned under the warranty.December 16Sold 150 razors for $13,500 cash.December 29Replaced 20 razors that were returned under the warranty.December 31Recognized warranty expense related to December sales with an adjusting entry.January 5Sold 100 razors for $9,000 cash.January 17Replaced 25 razors that were returned under the warranty.January 31Recognized warranty expense related to January sales with an adjusting entry.
What is the balance of the Estimated Warranty Liability account as of December 31?
What is the balance of the Estimated Warranty Liability account as of January 31?
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