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 2018 with a refund liability of $460,000. During 2018, Halifax sold merchandise on account for $13,100,000. Halifax's merchandise costs it 60% of merchandise selling price. Also during the year, customers returned $650,000 in sales for credit, with $358,000 of those being returns of merchandise sold prior to 2018, and the rest being merchandise sold during 2018. 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 2018 of merchandise that was sold prior to 2018; (b) record actual returns in 2018 of merchandise that was sold during 2018; 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?

No Year General Journal Debit Credit 1 2018 Refund liability 358,000 Accounts receivable 358,000 2 2018 214,800 Inventory Inventoryestimated returns 214,800 3 2018 Sales returns 292,000 Accounts receivable 292,000 4 2018 175,200 Inventory Cost of goods sold 175,200 5 2018 Sales returns 538,400 Refund liability 538,400 6 2018 Inventoryestimated returns 323,040 Cost of goods sold 323,040 X