6.

Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2024 with a refund liability of $470,000. During 2024, Halifax sold merchandise on account for $13,200,000. Halifax's merchandise costs are 60% of merchandise selling price. Also during the year, customers returned $524,000 in sales for credit, with $289,000 of those being returns of merchandise sold prior to 2024, and the rest being merchandise sold during 2024. Sales returns, estimated to be 4% of sales, are recorded as an adjusting entry at the end of the year.

Required:

1. Prepare entries to (a) record actual returns in 2024 of merchandise that was sold prior to 2024; (b) record actual returns in 2024 of merchandise that was sold during 2024; and (c) adjust the refund liability to its appropriate balance at year end.
2. What is the amount of the year-end refund liability after the adjusting entry is recorded?

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8.

Johnson Company calculates its allowance for uncollectible accounts as 5% of its ending balance in gross accounts receivable. The allowance for uncollectible accounts had a credit balance of $30,000 at the beginning of 2024. No previously written-off accounts receivable were reinstated during 2024. At 12/31/2024, gross accounts receivable totaled $500,100, and prior to recording the adjusting entry to recognize bad debts expense for 2024, the allowance for uncollectible accounts had a debit balance of 55,000.

Required:

1. What was the balance in gross accounts receivable as of 12/31/2023?
2. What journal entry should Johnson record to recognize bad debt expense for 2024?
3. Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2024. Determine the amount of accounts receivable written off during 2024.
4. If Johnson instead used the direct write-off method, what would bad debt expense be for 2024?

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11.

Castle Company provides estimates for its uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $17,780 at the beginning of 2024 and a $23,410 credit balance at the end of 2024 (after adjusting entries). If the direct write-off method had been used to account for uncollectible accounts (bad debt expense equals actual write-offs), the income statement for 2024 would have included bad debt expense of $18,100 and revenue of $3,200 from the collection of previously written off bad debts.

Required:

Determine bad debt expense for 2024 according to the allowance method.

Bad debt expense for the year 2024 _______

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13.

On January 1, 2024, Wright Transport sold four school buses to the Elmira School District. In exchange for the buses, Wright received a note requiring payment of $517,000 by Elmira on December 31, 2026. The effective interest rate is 8%.

Note: Use appropriate factor(s) from the tables provided. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

Required:

1. How much sales revenue would Wright recognize on January 1, 2024, for this transaction?
2. Prepare journal entries to record the sale of merchandise on January 1, 2024 (omit any entry that might be required for the cost of the goods sold), the December 31, 2024, interest accrual, the December 31, 2025, interest accrual, and receipt of payment of the note on December 31, 2026.

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