please help me with correct answers. Thanks!!!! On October 29,. 2014. Lobo Co, b

Question

please help me with correct answers. Thanks!!!!

On October 29,. 2014. Lobo Co, began operations b October 29, 2014, Lobo Co, began operations by purchasing razors f or resale. Lobo uses the perpetual Problen tory method. The razors have a 90-day warranty that requires the company to rep inven lace any non ok Warranty razor. When a razor is returned, the ing 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 $73 im both 2014 and 2015. Th Tiability P4 e manufacturer has advised the company to expect warranty costs to equal 8% lar sales. The following transactions and events occurred of dol 2014 Nov. 11 Sold 105 razors for $7,875 cash Dec. 9 Replaced 15 razors that were returned under the warranty 30 Recognized warranty expense related to November sales with an adjusting entry. 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. 2015 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

Explanation / Answer

The journal entries for the transactions and adjustments made in the year 20014 and 2015 are as under:

11th Nov.2014             Cash Account                                       $7,875

                                                Sales Account                                      $7,875

                        (Being 105 razors sold in cash)

30th Nov. 2014 Warranty Expenses Account                $630

                                    Estimated Warranty Liability                             $630

(Being Warranty expenses recorded on sales)

Warranty expenses       =Sales*8%

=$7,875*8%

=$630

9th Dec. 2014 Estimated Warranty Liability                               $300

                                    Inventory                                                                      $300

(Being 15 razors returned under warranty)

The replacement cost of the razor is $20 per razor. The replacement cost of 15 razors would be 15 @ $20 per razor. (15*$20=$300)

16th Dec.2014 Cash Account                                      $16,500

                                                Sales Account                                      $16,500

                        (Being 220 razors sold in cash)

29th Dec. 2014 Estimated Warranty Liability                             $600

                                    Inventory                                                                      $600

(Being 30 razors returned under warranty)

The replacement cost of the razor is $20 per razor. The replacement cost of 30 razors would be 30 razors @ $20 per razor. (30*$20=$600)

31st Dec. 2014 Warranty Expenses Account                 $1,320

                                    Estimated Warranty Liability                             $1,320

(Being Warranty expenses recorded on sales)

Warranty expenses       =Sales*8%

=$16,500*8%

=$1,320

The journal entries for the year 2015 are as under:

5th Jan..2015    Cash Account                                      $11,250

                                                Sales Account                                      $11,250

                        (Being 150 razors sold in cash)

17th Jan. 2015 Estimated Warranty Liability                              $1,000

                                    Inventory                                                                      $1,000

(Being 50 razors returned under warranty)

The replacement cost of the razor is $20 per razor. The replacement cost of 30 razors would be 50 razors @ $20 per razor. (50*$20=$600)

31st Jan. 2015 Warranty Expenses Account                  $900

                                    Estimated Warranty Liability                             $900

(Being Warranty expenses recorded on sales)

Warranty expenses       =Sales*8%

=$11,250*8%

=$900

2.

At the end of the month November 2014 the warranty expenses recorded is $630 calculated as under:

Warranty expenses       =Sales*8%

=$7,875*8%

=$630

At the end of the month December 2014 the warranty expenses recorded is $1,320 calculated as under:

Warranty expenses       =Sales*8%

=$16,500*8%

=$1,320

3.

At the end of the month January 2015 the warranty expenses recorded is $900 calculated as under:

Warranty expenses       =Sales*8%

=$11,250*8%

=$900

4.

The estimated warranty liability account as on 31st December 2014 is as under:

5.

The estimated warranty liability account as on 31st January 2015 is as under:

Estimated Warranty Liability                              As on 31st December 2014 9th Dec. 2014 Inventory $                  300 30th Nov.2014 Warranty Exp. $                630 20th Dec.2014 Inventory $                  600 31st Dec.2014 Warranty Exp. $             1,320 31st Dec.2014 Balance $              1,050 Total $              1,950 Total $             1,950

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