9-4

On October 29, 2016, Lobo Co. began operations by purchasingrazors for resale. Lobo uses the perpetual inventory method. Therazors have a 90-day warranty that requires the company to replaceany nonworking razor. When a razor is returned, the companydiscards it and mails a new one from Merchandise Inventory to thecustomer. The company's cost per new razor is $14 and its retailselling price is $90 in both 2016 and 2017. The manufacturer hasadvised the company to expect warranty costs to equal 9% of dollarsales. The following transactions and events occurred.

2016

Nov.		11		Sold 50 razors for $4,500 cash.
		30		Recognized warranty expense related to November sales with anadjusting entry.
Dec.		9		Replaced 10 razors that were returned under the warranty.
		16		Sold 150 razors for $13,500 cash.
		29		Replaced 20 razors that were returned under the warranty.
		31		Recognized warranty expense related to December sales with anadjusting entry.

2017

Jan.		5		Sold 100 razors for $9,000 cash.
		17		Replaced 25 razors that were returned under the warranty.
		31		Recognized warranty expense related to January sales with anadjusting entry.

1.1 Prepare journal entries to record abovetransactions and adjustments for 2016.
  

• 1Record the sales revenue of 50 razors for $4,500 cash.

• 2Record the cost of goods sold for 50 razors.

• 3Record the estimated warranty expense at 9% of Novembersales.

• 4Record the replacement of 10 razors that were returned underthe warranty.

• 5Record the sales revenue of 150 razors for $13,500 cash.

• 6Record the cost of goods sold for 150 razors.

• 7Record the replacement of 20 razors that were returned underthe warranty.

• 8Record the estimated warranty expense at 9% of Decembersales.

• 1Record the sales revenue of 100 razors for $9,000 cash.

• 2Record the cost of goods sold for 100 razors.

• 3Record the replacement of 25 razors that were returned underthe warranty.

• 4Record the adjusting entry for warranty expense for the monthof January 2017.