On October 29, Lobo Co. began operations by purchasing razors for resale. The razors have a 90-day warranty. 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 $90. The company expects warranty costs to equal 7% of dollar sales. The following transactions occurred. Nov. 11 Sold 70 razors for $6, 300 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. 9 Replaced 14 razors that were returned under the warranty. 16 Sold 210 razors for $18,900 cash. 29 Replaced 28 razors that were returned under the warranty. 31 Recognized warranty expense related to December sales with an adjusting entry. 5 Sold 140 razors for $12,600 cash. 17 Replaced 33 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry. Dec. Jan. Problem 9-4A Part 3 3. How much warranty expense is reported for January? Warranty expense < Prey of 15 Next > 13 14 15

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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**Lobo Co. Warranty Transactions Overview**

On October 29, Lobo Co. commenced operations by acquiring razors for resale. These razors include a 90-day warranty. Upon return, the company discards the used razor and sends a new one from Merchandise Inventory to the customer. The cost for each razor is $15, with a retail sale price of $90. The company anticipates warranty expenses to be 7% of sales revenue. Here are the transactions recorded:

- **November**
  - **11:** Sold 70 razors for $6,300 cash.
  - **30:** Recognized warranty expense for November’s sales through an adjusting entry.

- **December**
  - **9:** Replaced 14 razors returned under warranty.
  - **16:** Sold 210 razors for $18,900 cash.
  - **29:** Replaced 28 razors returned under warranty.
  - **31:** Recognized warranty expense for December’s sales through an adjusting entry.

- **January**
  - **5:** Sold 140 razors for $12,600 cash.
  - **17:** Replaced 33 razors returned under warranty.
  - **31:** Recognized warranty expense for January’s sales through an adjusting entry.

**Problem 9-4A Part 3**

**Question:**
3. How much warranty expense is reported for January?

**Answer:** 
Warranty expense: [Enter amount here]
Transcribed Image Text:**Lobo Co. Warranty Transactions Overview** On October 29, Lobo Co. commenced operations by acquiring razors for resale. These razors include a 90-day warranty. Upon return, the company discards the used razor and sends a new one from Merchandise Inventory to the customer. The cost for each razor is $15, with a retail sale price of $90. The company anticipates warranty expenses to be 7% of sales revenue. Here are the transactions recorded: - **November** - **11:** Sold 70 razors for $6,300 cash. - **30:** Recognized warranty expense for November’s sales through an adjusting entry. - **December** - **9:** Replaced 14 razors returned under warranty. - **16:** Sold 210 razors for $18,900 cash. - **29:** Replaced 28 razors returned under warranty. - **31:** Recognized warranty expense for December’s sales through an adjusting entry. - **January** - **5:** Sold 140 razors for $12,600 cash. - **17:** Replaced 33 razors returned under warranty. - **31:** Recognized warranty expense for January’s sales through an adjusting entry. **Problem 9-4A Part 3** **Question:** 3. How much warranty expense is reported for January? **Answer:** Warranty expense: [Enter amount here]
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