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On October 29, Lobo Co. began operations by purchasing razors for resale. The razors have a
90-day warranty. When a razor is returned, the company discards it and malls a new one from
Merchandise Inventory to the customer. The company's cost per new razor is $14 and its retall
selling price is $70. The company expects warranty costs to equal 7% of dollar sales. The
following transactions occurred,
Nov. 11 Sold 80 razors for 55,680 cash
30 Recognized warranty expense related to November sales wáth an adjusting entry.
Dec 9 Replaced 16 razors that were returned under the warranty.
16 Sold 240 razors for $16,800 cash,
29 Replaced 32 razors that were returned under the warranty
31 Recognized warranty expense related to December sales with an adjusting entry.
5 Sold 160 razors for $11,280 cash.
17 Replaced 37 razors that were returned under the warranty.
31 Recognized warranty expense related to January sales with an adjusting entry.
Jan
4. What is the balance of the Estimated Warranty Liability account as of December 312
Estimated warranty liability balance

P8-4b dropping unfavorable division based on the following analysis of last year's operations of groves, inc., a financial vice president of the company believes that the firm's total net income could be increased by $160,000 if its design division were discontinued. (amounts are given in the thousands of dollars.) required provide answers for each of the following independent situations: a. assuming that total fixed costs and expenses would not be affected by discontinuing the design division, prepare an analysis showing why you agree or disagree with the vice president. b. assume that the discontinuance of the design division will enable the company to avoid 30% of the fixed portion of cost of services and 40% of the fixed operating expenses allocated to the design division. calculate the resulting effect on net income. c. assume that in addition to the cost avoidance in requirement (b), the capacity released by discontinuance of the design division can be used to provide 6,000 new services that would have a variable cost per service of $60 and would require additional fixed costs totaling $68,000. at what unit price must the new service be sold if groves is to increase its total net income by $180,000?