Torres Corp. estimates its sales returns at the end of each month. On December 1, 2022, Torres Corp.’s “Sales Return Liability” account had a normal balance of $10,000. During December, the company had customer sales totaling $600,000 and actual returns of $12,000. At the end of December, Torres estimates sales returns related to December’s sales will be $8,000.
What should be the “Sales Return Liability” account balance on 12/31/22 after all entries have been made?
Torres Corp. estimates its sales returns at the end of each month. On December 1, 2022, Torres Corp.’s “Sales Return Liability” account had a normal balance of $10,000. During December, the company had customer sales totaling $600,000 and actual returns of $12,000. At the end of December, Torres estimates sales returns related to December’s sales will be $8,000.
What should be the “Sales Return Liability” account balance on 12/31/22 after all entries have been made?
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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 $16 and its retail selling price is $70 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 70 razors for $4,900 cash. | ||
| 30 | Recognized warranty expense related to November sales with an adjusting entry. | |||
| Dec. | 9 | Replaced 14 razors that were returned under the warranty. | ||
| 16 | Sold 210 razors for $14,700 cash. | |||
| 29 | Replaced 28 razors that were returned under the warranty. | |||
| 31 | Recognized warranty expense related to December sales with an adjusting entry. |
2017
| Jan. | 5 | Sold 140 razors for $9,800 cash. | ||
| 17 | Replaced 33 razors that were returned under the warranty. | |||
| 31 | Recognized warranty expense related to January sales with an adjusting entry. |
2. How much warranty expense is reported for November 2016 and for December 2016?
| Warranty expense for November 2016 | |
| Warranty expense for December 2016 | $ |
3. How much warranty expense is reported for January 2017?
| Warranty expense | $ |
4. What is the balance of the Estimated Warranty Liability account as of December 31, 2016?
| Estimated warranty liability balance | $ |
5. What is the balance of the Estimated Warranty Liability account as of January 31, 2017?
| Estimated warranty liability balance | $ |
