On November 9, 2020, Snowbot Snow Removal began to buy and resell snow blowers for $700 each. Snowbot uses the perpetual system to account for inventories. The snow blowers are covered under a warranty that requires the company to replace any non-working snow blower within 60 days. When a snow blower is returned, the company simply discards it and sends a new one from inventory to the customer. The company?s cost for a new snow blower is $540. The manufacturer has advised the company to expect warranty costs to equal 20% of the total units sold. These transactions occurred in 2020 and 2021.

Required

1. How much warranty expense should be reported for November and December 2020?

2. How much warranty expense should be reported for January 2021?

3. What is the balance of the estimated warranty liability as of December 31, 2020?

4. What is the balance of the estimated warranty liability as of January 31, 2021?

5. Prepare journal entries to record the transactions and adjustments (ignore sales taxes).

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2020 Sold 60 snow blowers each for $700. Nov. 16 30 Recognized warranty expense for November with an adjusting entry. Dec. 10 Replaced two snow blowers that were returned under the warranty. Sold 140 snow blowers. 20 30 Replaced 17 snow blowers that were returned under the warranty. 31 Recognized warranty expense for December with an adjusting entry. 2021 Sold 50 snow blowers for $35,000 cash. Jan. 20 Replaced 26 snow blowers that were returned under the warranty. 31 Recognized warranty expense for January with an adjusting entry.