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 $390,000. During 2021, Halifax sold merchandise on account for $12,400,000. Halifax's merchandise costs it 65% of merchandise selling price. Also during the year, customers 

returned $368,000 in sales for credit, with$203,000 of those being returns of merchandise sold prior to 2021, and the rest being merchandise sold during 2021. Sales returns, estimated to be 3% 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 to2021; (b) record actual returns in 2021 of merchandise that was soldduring2021; 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 rating: 100% (QA)

Lets break down the requirements and address each part separately Prepare entries to a Record actual ... View the full answer