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 $16 and its retail selling price is $90 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 60 razors for $5,400 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. 9 Replaced 12 razors that were returned under the warranty. 16 Sold 180 razors for $16,200 cash. 29 Replaced 24 razors that were returned under the warranty. 31 Recognized warranty expense related to December sales with an adjusting entry. Dec.

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 $16 and its retail selling price is $90 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 60 razors for $5,400 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. 9 Replaced 12 razors that were returned under the warranty. 16 Sold 180 razors for $16,200 cash. 29 Replaced 24 razors that were returned under the warranty. 31 Recognized warranty expense related to December sales with an adjusting entry. Dec.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On July 19, 2021, SLRTN Inc. sold 19,000 units of its inventory to a customer for a total cash price ofP1,235,000. One unit costs the company P26. An excerpt in the contract of sale states that all goods may be returned by the customer to the seller within 31 days from purchase should the goods be of unsatisfactory quality. Based on past experience, 7% of the sold units are usually returned. The company employs a perpetual inventory system. The entries on July 19, 2021 will include all of the following, EXCEPT A. Debit to cash, P1,235,000 B. Debit to refund liability, P34,580 C. Credit to sales revenue, P1,148,550 D. Credit to inventory, P494,000
Halifax Manufacturing allows its customers to return merchandise for any reason and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2024 with a refund liability of $390,000. During 2024, Halifax sold merchandise on account for $12,800,000. Halifax's merchandise costs are 70% of merchandise selling price. Also during the year, customers returned $370,000 in sales for credit, with $204,000 of those being returns of merchandise sold prior to 2024, and the rest being merchandise sold during 2024. Sales returns, estimated to be 3% of sales, are recorded as an adjusting entry at the end of the year. Required: 1. Prepare entries to (a) record actual returns in 2024 of merchandise that was sold prior to 2024; (b) record actual returns in 2024 of merchandise that was sold during 2024; and (c) adjust the refund liability to its appropriate balance at year end. 2. What is the amount of the year-end refund…
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