Question
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
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 $460,000. During 2021, Halifax sold merchandise on account for $13,100,000. Halifax's merchandise costs is 60% of merchandise selling price. Also during the year, customers returned $650,000 in sales for credit, with $358,000 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?
Journal entry worksheet Record the cost of merchandise returned for goods sold prior to 2021. Note: Enter debits before credits. Year General Journal Debit Credit 2021 Inventory 214,800 Inventory-estimated returns 214,800 Record entry Clear entry View general journal Journal entry worksheet 2 3 5 6 Record the actual sales return of merchandise sold during 2021. Note: Enter debits before credits. Year General Journal Debit Credit 2021 Sales returns 292,000 Accounts receivable 292,000 Record entry Clear entry View general journal Journal entry worksheet Record the year-end adjusting entry for estimated returns. Note: Enter debits before credits. Year General Journal Debit Credit 2021 Sales returns Refund liability Record entry Clear entry View general journal Journal entry worksheet 1 2 3 4 5 5 09 Record the adjusting entry for the estimated return of merchandise to inventory. Note: Enter debits before credits. Year General Journal Debit Credit 2021 Record entry Clear entry View general journal Required 1 Required 2 What is the amount of the year-end refund liability after the adjusting entry is recorded? Ending balance in refund liabilityStep by Step Solution
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