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Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts.
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 $420,000. During 2021, Halifax sold merchandise on account for $12,700,000. Halifax's merchandise costs is 60% of merchandise selling price. Also during the year, customers returned $619,000 in sales for credit, with $342,000 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? 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.) Journal entry worksheet 56 Record the actual sales return of merchandise sold prior to 2021. Note: Enter debits before credits. Year General Journal Debit Credit 2021 Refund liability 342,000 Accounts receivable 342,000 Record entry Clear entry View general journal Journal entry worksheet 2 3 56 Record the cost of merchandise returned for goods sold prior to 2021. Note: Enter debits before credits. Year 2021 Inventory Inventory-estimated returns General Journal Debit Credit 205,200 205,200 Record entry Clear entry View general journal Journal entry worksheet < 2 3 56 Record the actual sales return of merchandise sold during 2021. Note: Enter debits before credits. Year 2021 General Journal Debit Credit Sales returns 277,000 Accounts receivable 277,000 Record entry Clear entry View general journal Journal entry worksheet 2 3 4 5 6 Record the cost of merchandise returned for goods sold during 2021. Note: Enter debits before credits. General Journal Debit Credit 166,200 166,200 Year 2021 Inventory Cost of goods sold Record entry Clear entry View general journal Journal entry worksheet < 5 6 Record the year-end adjusting entry for estimated returns. Note: Enter debits before credits. Year 2021 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet 2 5 6 Record the adjusting entry for the estimated return of merchandise to inventory. Note: Enter debits before credits. Year 2021 General Journal Debit Credit 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 liability < Required 1 Required 2 >
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