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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 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 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 60 razors for $4,200 cash.
	30	Recognized warranty expense related to November sales with an adjusting entry.
Dec.	9	Replaced 12 razors that were returned under the warranty.
	16	Sold 180 razors for $12,600 cash.
	29	Replaced 24 razors that were returned under the warranty.
	31	Recognized warranty expense related to December sales with an adjusting entry.

2015

Jan.	5	Sold 120 razors for $8,400 cash.
	17	Replaced 29 razors that were returned under the warranty.
	31	Recognized warranty expense related to January sales with an adjusting entry.

1.1	Prepare journal entries to record these transactions and adjustments for 2014.

Journal Entry Worksheet

Record the sales revenue of 60 razors for $4,200 cash.

Record the cost of goods sold for 60 razors.

Record the estimated warranty expense at 8% of November sales.

Record the replacement of 12 razors that were returned under the warranty.

Record the sales revenue of 180 razors for $12,600 cash.

Record the cost of goods sold for 180 razors.

Record the replacement of 24 razors that were returned under the warranty.

Record the estimated warranty expense at 8% of December sales.

Date	General Journal	Debit	Credit
Nov 11	Cash	4,200
	Sales		4,200
Nov 11	Cost of goods sold
	Merchandise inventory
Nov 30	Warranty expense
	Estimated warranty liability
Dec 09		180
			180
Dec 16	Cash
	Sales
Dec 16	Cost of goods sold
	Merchandise inventory
Dec 29	Estimated warranty liability
Dec 31	Warranty expense
	Estimated warranty liability

1.2	Prepare journal entries to record these transactions and adjustments for 2015.

Journal Entry Worksheet

Record the sales revenue of 120 razors for $8,400 cash.

Record the cost of goods sold for 120 razors.

Record the replacement of 29 razors that were returned under the warranty.

Record the adjusting entry for warranty expense for the month of January 2015.

Date	General Journal	Debit	Credit
Jan 05	Cash
	Sales
Jan 05	Cost of goods sold
	Merchandise inventory
Jan 17	Estimated warranty liability
Jan 31	Estimated warranty liability

How much warranty expense is reported for November 2014 and for December 2014?

Warranty expense for November 2014
Warranty expense for December 2014

How much warranty expense is reported for January 2015?

Warranty expense