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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 malls a new one from
Merchandise Inventory to the customer. The company's cost per new razor is $14 and its retall
selling price is $70. The company expects warranty costs to equal 7% of dollar sales. The
following transactions occurred,
Nov. 11 Sold 80 razors for 55,680 cash
30 Recognized warranty expense related to November sales wáth an adjusting entry.
Dec 9 Replaced 16 razors that were returned under the warranty.
16 Sold 240 razors for $16,800 cash,
29 Replaced 32 razors that were returned under the warranty
31 Recognized warranty expense related to December sales with an adjusting entry.
5 Sold 160 razors for $11,280 cash.
17 Replaced 37 razors that were returned under the warranty.
31 Recognized warranty expense related to January sales with an adjusting entry.
Jan
4. What is the balance of the Estimated Warranty Liability account as of December 312
Estimated warranty liability balance