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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. 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 $410,000. During 2021, Halifax sold merchandise on account for $13,500,000. Halifax's merchandise costs is 65% of merchandise selling price. Also during the year, customers returned $532,000 in sales for credit, with $294,000 of those being returns of merchandise sold prior to 2021, and the rest being merchandise sold during 2021. Sales returns, estimated to be 4% 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? 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.) No Year Debit Credit 2021 General Journal Refund liability Accounts receivable 294,000 294,000 2021 191,100 Inventory Inventory-estimated returns 191,100 2021 238,000 Sales returns Accounts receivable 238,000 2021 154,700 Inventory Cost of goods sold 154,700 2021 Sales returns Refund liability 2021 Inventory-estimated returns Cost of goods sold 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 $ 186,000 X
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