Required information Problem 11-4A Warranty expense and liability estimation LO P4 [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 $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. 2017 Jan. 5 Sold 120 razors for $10,800 cash. 17 Replaced 29 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry. Problem 11-4A Part 3 3. How much warranty expense is reported for January 2017? Warranty expense
Required information Problem 11-4A Warranty expense and liability estimation LO P4 [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 $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. 2017 Jan. 5 Sold 120 razors for $10,800 cash. 17 Replaced 29 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry. Problem 11-4A Part 3 3. How much warranty expense is reported for January 2017? Warranty expense
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**Required Information**
**Problem 11-4A Warranty Expense and Liability Estimation LO P4**
[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 $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.
- **Nov. 30:** Recognized warranty expense related to November sales with an adjusting entry.
- **Dec. 9:** Replaced 12 razors that were returned under the warranty.
- **Dec. 16:** Sold 180 razors for $16,200 cash.
- **Dec. 29:** Replaced 24 razors that were returned under the warranty.
- **Dec. 31:** Recognized warranty expense related to December sales with an adjusting entry.
**2017**
- **Jan. 5:** Sold 120 razors for $10,800 cash.
- **Jan. 17:** Replaced 29 razors that were returned under the warranty.
- **Jan. 31:** Recognized warranty expense related to January sales with an adjusting entry.
**Problem 11-4A Part 3**
3. How much warranty expense is reported for January 2017?
[Insert Warranty Expense Box Here for Input]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F64166d4c-e482-4f11-a4ed-1a99eef62872%2F89f65b22-7d59-4735-9263-5d5723ee4464%2F8i3egen_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Required Information**
**Problem 11-4A Warranty Expense and Liability Estimation LO P4**
[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 $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.
- **Nov. 30:** Recognized warranty expense related to November sales with an adjusting entry.
- **Dec. 9:** Replaced 12 razors that were returned under the warranty.
- **Dec. 16:** Sold 180 razors for $16,200 cash.
- **Dec. 29:** Replaced 24 razors that were returned under the warranty.
- **Dec. 31:** Recognized warranty expense related to December sales with an adjusting entry.
**2017**
- **Jan. 5:** Sold 120 razors for $10,800 cash.
- **Jan. 17:** Replaced 29 razors that were returned under the warranty.
- **Jan. 31:** Recognized warranty expense related to January sales with an adjusting entry.
**Problem 11-4A Part 3**
3. How much warranty expense is reported for January 2017?
[Insert Warranty Expense Box Here for Input]
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