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 $15 and its retail selling price is $70. The company expects warranty costs to equal 6% of dollar sales. The following transactions occurred. November 11 Sold 60 razors for $4,200 cash. November 30 Recognized warranty expense related to November sales with an adjusting entry. December 9 Replaced 12 razors that were returned under the warranty. December 16 Sold 180 razors for $12,600 cash. December 29 Replaced 24 razors that were returned under the warranty. December 31 Recognized warranty expense related to December sales with an adjusting entry. January 5 Sold 120 razors for $8,400 cash. January 17 Replaced 29 razors that were returned under the warranty. January 31 Recognized warranty expense related to January sales with an adjusting entry. equired: Prepare journal entries to record above transactions and adjustments. Journal entrv worksheet 2. How much warranty expense is reported for November and for December? 3. How much warranty expense is reported for January? 4. What is the balance of the Estimated Warranty Liability account as of December 31? 5. What is the balance of the Estimated Warranty Liability account as of January 31 ? 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 $15 and its retail selling price is $70. The company expects warranty costs to equal 6% of dollar sales. The following transactions occurred. November 11 Sold 60 razors for $4,200 cash. November 30 Recognized warranty expense related to November sales with an adjusting entry. December 9 Replaced 12 razors that were returned under the warranty. December 16 Sold 180 razors for $12,600 cash. December 29 Replaced 24 razors that were returned under the warranty. December 31 Recognized warranty expense related to December sales with an adjusting entry. January 5 Sold 120 razors for $8,400 cash. January 17 Replaced 29 razors that were returned under the warranty. January 31 Recognized warranty expense related to January sales with an adjusting entry. equired: Prepare journal entries to record above transactions and adjustments. Journal entrv worksheet 2. How much warranty expense is reported for November and for December? 3. How much warranty expense is reported for January? 4. What is the balance of the Estimated Warranty Liability account as of December 31? 5. What is the balance of the Estimated Warranty Liability account as of January 31
