Acc225 Fundamental of Accounting Principles: P11-2A On October 29, 2008, Bram Co. began operations

Acc225 Fundamental of Accounting Principles P11-2A On October 29, 2008, Bram Co. began operations by purchasing razors for resale. Bram 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 $90 in both 2008 and 2009. The manufacturer has advised the company to expect warranty costs to equal 7% of dollar sales. The following transactions and events occurred. 2008 Nov. 11 Sold 80 razors for $7,200 cash. 30 Recognized warranty expense related to November sales with an adjusting entry. Dec. 9 Replaced 16 razors that were returned under the warranty. 16 Sold 240 razors for $21,600 cash. 29 Replaced 32 razors that were returned under the warranty. 31 Recognized warranty expense related to December sales with an adjusting entry. 2009 Jan. 5 Sold 160 razors for $14,400 cash. 17 Replaced 37 razors that were returned under the warranty. 31 Recognized warranty expense related to January sales with an adjusting entry. 1. Prepare journal entries to record these transactions and adjustments for 2008 and 2009. (Omit the "$" sign in your response.) 2. How much warranty expense is reported for November 2008 and for December 2008? (Omit the "$" sign in your response.) 3. How much warranty expense is reported for January 2009? (Omit the "$" sign in your response.) 4. What is the balance of the Estimated Warranty Liability account as of December 31, 2008? (Omit the "$" sign in your response.) 5. What is the balance of the Estimated Warranty Liability account as of January 31, 2009? (Omit the "$" sign in your response.)
Powered by