Warrenty Expense and liability estimate

(((On October 29, 2015, 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 $16 Dollars and its retail selling price is $60 Dollars in both 2015 and 2016. The manufacturer has advised the company to expect warranty costs to equal 7% of dollar sales. The following transactions and events occurred.

2015

Nov 11 Sold 70 razors for $4,200 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 $12,600 cash. 29 Replaced 28 razors that were returned under the warranty. 31 Recognized warranty expense related to December sales with an adjusting entry.

2016 Jan. 5 Sold 140 razors for $8,400 cash. 17 Replaced 33 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry.

References

1.1 Prepare journal entries to record these transactions and adjustments for 2015. View transaction list Journal entry worksheet Record the sales revenue of 70 razors for $4,200 cash. Note: Enter debits before credits. Date General Journal Debit Credit Nov 11 Record entry Clear entry View general journal