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 it 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? 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.) Year No General Journal Debit Credit Refund liability 1 2021 294,000 Accounts receivable 294,000 2 2021 Inventory 191,100 Inventory-estimated returns 191,100 Sales returns 2021 Accounts receivable Inventory 4 2021 Cost of goods sold No journal entry required 2021 5 No journal entry required X 2021 6 LO 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 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 it 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? 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.) Year No General Journal Debit Credit Refund liability 1 2021 294,000 Accounts receivable 294,000 2 2021 Inventory 191,100 Inventory-estimated returns 191,100 Sales returns 2021 Accounts receivable Inventory 4 2021 Cost of goods sold No journal entry required 2021 5 No journal entry required X 2021 6 LO 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
