Required information Problem 11-4A Warranty expense and liability estimation LO P4 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 $15 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred. 2016 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. 2017 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. Problem 11-4A Part 1 1.1 Prepare journal entries to record above transactions and adjustments for 2016. View transaction list Journal entry worksheet 2 3 4 5 6 7 8 Record the sales revenue of 70 razors for $4,900 cash. Note: Enter debits before credits. General Journal Debit Credit Date Nov 11 Required information Problem 11-4A Warranty expense and liability estimation LO P4 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 $15 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred. 2016 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. 2017 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. Problem 11-4A Part 2 2. How much warranty expense is reported for November 2016 and for December 2016? Warranty expense for November 2016 Warranty expense for December 2016 Required information Problem 11-4A Warranty expense and liability estimation LO P4 (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 $15 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred. 2016 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. 2017 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. Problem 11-4A Part 3 3. How much warranty expense is reported for January 2017? Warranty expense Required information Problem 11-4A Warranty expense and liability estimation LO P4 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 $15 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred. 2016 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. 2017 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. Problem 11-4A Part 4 4. What is the balance of the Estimated Warranty Liability account as of December 31, 2016? Estimated warranty liability balance Required information Problem 11-4A Warranty expense and liability estimation LO P4 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 $15 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred. 2016 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. 2017 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. Problem 11-4A Part 5 5. What is the balance of the Estimated Warranty Liability account as of January 31, 2017? Estimated warranty liability balance Required information Problem 11-4A Warranty expense and liability estimation LO P4 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 $15 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred. 2016 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. 2017 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. Problem 11-4A Part 1 1.1 Prepare journal entries to record above transactions and adjustments for 2016. View transaction list Journal entry worksheet 2 3 4 5 6 7 8 Record the sales revenue of 70 razors for $4,900 cash. Note: Enter debits before credits. General Journal Debit Credit Date Nov 11 Required information Problem 11-4A Warranty expense and liability estimation LO P4 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 $15 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred. 2016 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. 2017 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. Problem 11-4A Part 2 2. How much warranty expense is reported for November 2016 and for December 2016? Warranty expense for November 2016 Warranty expense for December 2016 Required information Problem 11-4A Warranty expense and liability estimation LO P4 (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 $15 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred. 2016 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. 2017 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. Problem 11-4A Part 3 3. How much warranty expense is reported for January 2017? Warranty expense Required information Problem 11-4A Warranty expense and liability estimation LO P4 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 $15 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred. 2016 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. 2017 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. Problem 11-4A Part 4 4. What is the balance of the Estimated Warranty Liability account as of December 31, 2016? Estimated warranty liability balance Required information Problem 11-4A Warranty expense and liability estimation LO P4 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 $15 and its retail selling price is $70 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 6% of dollar sales. The following transactions and events occurred. 2016 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. 2017 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. Problem 11-4A Part 5 5. What is the balance of the Estimated Warranty Liability account as of January 31, 2017? Estimated warranty liability balance