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 $12,800,000. Halifax's merchandise costs is 70% of merchandise selling price. Also during the year, customers returned $370,000 in sales for credit, with $204,000 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.

• Record the actual sales return of merchandise sold prior to 2021.

• 2

  Record the cost of merchandise returned for goods sold prior to 2021.

• 3

  Record the actual sales return of merchandise sold during 2021.

• 4

  Record the cost of merchandise returned for goods sold during 2021.

• 5

  Record the year-end adjusting entry for estimated returns.

• 6

  Record the adjusting entry for the estimated return of merchandise to inventory.

2. What is the amount of the year-end refund liability after the adjusting entry is recorded?