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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Question
![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 $5,400o 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 $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.
2017
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.
Jan.
Problem 11-4A Part 3
3. How much warranty expense is reported for January 2017?
Warranty expense](/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 $5,400o 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 $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.
2017
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.
Jan.
Problem 11-4A Part 3
3. How much warranty expense is reported for January 2017?
Warranty expense
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