On October 29, Lobo Company 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 5% of dollar sales. The following transactions occurred. November 11 Sold 50 razors for $4,500 cash. November 30 Recognized warranty expense related to November sales with an adjusting entry. December 9 Replaced 10 razors that were returned under the warranty. December 16 Sold 150 razors for $13,500 cash. December 29 Replaced 20 razors that were returned under the warranty. December 31 Recognized warranty expense related to December sales with an adjusting entry. January 5 January 17 Replaced 25 razors that were returned under the warranty. January 31 Recognized warranty expense related to January sales with an adjusting entry. Sold 100 razors for $9,000 cash. Required: 1. Prepare journal entries to record above transactions and adjustments.

On October 29, Lobo Company 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 5% of dollar sales. The following transactions occurred. November 11 Sold 50 razors for $4,500 cash. November 30 Recognized warranty expense related to November sales with an adjusting entry. December 9 Replaced 10 razors that were returned under the warranty. December 16 Sold 150 razors for $13,500 cash. December 29 Replaced 20 razors that were returned under the warranty. December 31 Recognized warranty expense related to December sales with an adjusting entry. January 5 January 17 Replaced 25 razors that were returned under the warranty. January 31 Recognized warranty expense related to January sales with an adjusting entry. Sold 100 razors for $9,000 cash. Required: 1. Prepare journal entries to record above transactions and adjustments.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 10E

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