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 $380,000. During 2021, Halifax sold merchandise on account for $12,300,000. Halifax's merchandise costs it 70% of merchandise selling price. Also during the year, customers returned $603,000 in sales for credit, with $333,000 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. Record the year-end adjusting entry for estimated returns.

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

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

Journal entry worksheet