Required information [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 $20 and its retail selling price is $75 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. The following transactions and events occurred. 2016 Nov. 11 Sold 105 razors for $7,875 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. 9 Replaced 15 razors that were returned under the warranty 16 Sold 220 razors for $16,500 cash 29 Replaced 30 razors that were returned under the warranty. 31 Recognized warranty expense related to December sales with an adjusting entry. Dec. 2017 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. Jan. 1 Prepare journal entries to record above transactions and adjustments for 2016 View transaction list Journal entry worksheet 1 2 3 4 5 6 7 8 Record the sales revenue of 105 razors for $7,875 cash. Note: Enter debits before credits. Date General Journal Debit Credit Nov 11 Record the cost of goods sold for 105 razors. Note: Enter debits before credits. Date General Journal Debit Credit Nov 11 Record the replacement of 15 razors that were returned under the warranty Note: Enter debits before credits. Date General Journal Debit Credit Dec 09 Record the sales revenue of 220 razors for $16,500 cash. Note: Enter debits before credits. Date General Journal Debit Credit Dec 16 Record the cost of goods sold for 220 razors. Note: Enter debits before credits. Date General Journal Debit Credit Dec 16 Record the replacement of 30 razors that were returned under the warranty. Note: Enter debits before credits. Date General Journal Debit Credit Dec 29 Record the estimated warranty expense at 8% of December sales. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31 2. How much warranty expense is reported for November 2016 and for December 2016? Warranty expense for November 2016 Warranty expense for December 2016 3. How much warranty expense is reported for January 2017? Warranty expense 4. What is the balance of the Estimated Warranty Liability account as of December 31, 2016? Estimated warranty liability balance 5. What is the balance of the Estimated Warranty Liability account as of January 31, 2017? Estimated warranty liability balance
