Exercise 7-8 (Algo) Sales returns (L07-4] 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 2021 with a refund liability of $400,000. During 2021, Halifax sold merchandise on account for $12,500,000. Halifax's merchandise costs is 70% of merchandise selling price. Also during the year, customers returned $613,000 in sales for credit, with $338,000 of those being returns of merchandise sold prior to 2021, and the rest being merchandise sold during 2021. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year. Required: 1. Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns in 2021 of merchandise that was sold during 2021; 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? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns in 2021 of merchandise that was sold during 2021; and (c) adjust the refund liability to its appropriate balance at year end. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Required 1 Required 2 Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns 2021 of merchandise that was sold during 2021; and (c) adjust the refund liability to its appropriate balance at year end. no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Credit Year 2021 General Journal Refund liability Accounts receivable Debit 338,000 338,000 2021 236,600 Inventory Inventory-estimated returns 236,600 2021 275,000 Sales returns Accounts receivable 275,000 2021 192,500 Inventory Cost of goods sold 192,500 2021 12,000 X Sales returns Refund liability 12,000 X 2021 8,400 X Inventory-estimated returns Cost of goods sold 8,400 X Required: 1. Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns in 2021 of merchandise that was sold during 2021; 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? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the amount of the year-end refund liability after the adjusting entry is recorded? Ending balance in refund liability $ 412,000 $