Business, 14.11.2019 23:31 karellopez96
On october 29, 2017, 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 $20 and its retail selling price is $75 in both 2017 and 2018. the manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. the following transactions and events occurred.
2017
nov. 11 sold 105 razors for $7,875 cash.
30 recognized warranty expense related to november sales with an adjusting entry.
dec. 9 replaced 15 razors that were returned under the warranty.
16 sold 220 razors for $16,500 cash.
29 replaced 30 razors that were returned under the warranty.
31 recognized warranty expense related to december sales with an adjusting entry.
2018
jan. 5 sold 150 razors for $11,250 cash.
17 replaced 50 razors that were returned under the warranty.
31 recognized warranty expense related to january sales with an adjusting entry.
problem 9-4a part 1
1a. prepare journal entries to record above transactions and adjustments for 2017.
1b. prepare journal entries to record above transactions and adjustments for 2018.
1a.
nov. 11: record the sales revenue of 105 razors for $7,875 cash.
nov. 11: record the cost of goods sold for 105 razors.
nov. 30: record the estimated warranty expense at 8% of november sales.
dec. 09: record the replacement of 15 razors that were returned under the warranty.
dec. 16: record the sales revenue of 220 razors for $16,500 cash.
dec. 16: record the cost of goods sold for 220 razors.
dec. 29: record the replacement of 30 razors that were returned under the warranty.
dec 31: record the estimated warranty expense at 8% of december sales.
1b. prepare journal entries to record above transactions and adjustments for 2018.
jan. 05: record the sales revenue of 150 razors for $11,250 cash.
jan. 05: record the cost of goods sold for 150 razors.
jan. 17: record the replacement of 50 razors that were returned under the warranty.
jan. 31: record the adjusting entry for warranty expense for the month of january 2018
Answers: 3
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On october 29, 2017, lobo co. began operations by purchasing razors for resale. lobo uses the perpet...
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