Required information Problem 11-4A Warranty expense and liability estimation LO P4 [The following information applies to the questions displayed below.) On October 29, 2016, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking 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 $14 and its retail selling price is $60 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 5% of dollar sales. The following transactions and events occurred. 2016 Nov. 11 Sold 60 razors for $3,600 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. Dec. 9 Replaced 12 razors that were returned under the warranty. 16 Sold 180 razors for $10,800 cash. 29 Replaced 24 razors that were returned under the warranty. 31 Recognized warranty expense related to December sales with an adjusting entry. 2017 Jan. 5 Sold 120 razors for $7,200 cash. 17 Replaced 29 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry. 1.1 Prepare journal entries to record above transactions and adjustments for 2016. Problem 11-4A Part 1 View transaction list 1.1 Prepare journal entries to record above transactions and adjustments for 2016. View transaction list Journal entry worksheet Journal entry worksheet Record the cost of goods sold for 60 razors. Note: Enter debits before credits. General Journal Debit Credit Note: Enter debits before credits. : Date General Journal Nov 11 Date Nov 11 Debit Credit Record entry Record entry View general journal View general journal Clear entry Clear entry 1.1 Prepare journal entries to record above transactions and adjustments for 2016, 1.1 Prepare journal entries to record above transactions and adjustments for 2016. View transaction list View transaction list Journal entry worksheet Journal entry worksheet Journal entry worksheet Note: Enter debits before credits. General Journal Dec 16 Date Debit Credit Note: Enter debits before credits. Date General Journal Dec 16 Debit Credit Record entry View general journal Record entry View general journal Clear entry Clear entry 1.1 Prepare journal entries to record above transactions and adjustments for 2016 . 1.1 Prepare journal entries to record above transactions and adjustments for 2016. . View transaction list View transaction list > Journal entry worksheet Record the sales revenue of 120 razors for $7,200 cash. Record the cost of goods sold for 120 razors. Note: Enter debits before credits. Note: Enter debits before credits. General Journal Credit Debit General Journal Debit Credit Date Jan 05 Date Jan 05 Record entry View general journal Record entry View general journal Clear entry Clear entry 1.2 Prepare journal entries to record above transactions and adjustments for 2017. 1.2 Prepare journal entries to record above transactions and adjustments for 2017 View transaction list View transaction list Journal entry worksheet Journal entry worksheet Record the replacement of 29 razors that were returned under the warranty. Record the adjusting entry for warranty expense for the month of January 2017. Note: Enter debits before credits. Note: Enter debits before credits. General Journal Date Jan 17 Debit Credit General Journal Date Jan 31 Debit Credit Record entry View general journal Record entry View general journal Clear entry Clear entry Problem 11-4A Part 2 2. How much warranty expense is reported for November 2016 and for December 2016? Warranty expense for November 2016 Warranty expense for December 2016 Problem 11-4A Part 3 3. How much warranty expense is reported for January 2017? Warranty expense Problem 11-4A Part 4 4. What is the balance of the Estimated Warranty Liability account as of December 31, 2016? Estimated warranty liability balance Problem 11-4A Part 5 5. What is the balance of the Estimated Warranty Liability account as of January 31, 2017? Estimated warranty liability balance