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 $410,000. During 2018, 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 2018, and the rest being merchandise sold during 2018. 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 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?

Journal entry number 5: Record the year-end adjusting entry for estimated returns. (Please explain the calculations)

Journal entry number 6: Record the adjusting entry for the estimated return of merchandise to inventory. (Please explain the calculations)

Credit No 1 Year 2018 General Journal Refund liability Refund liabil Accounts receivable Debit 294,000 294,000 2 2018 191,100 Inventory Inventory-estimated returns 191,100 pok 3 2018 238,000 nt Sales returns Accounts receivable 238,000 ences 2018 154,700 Inventory Cost of goods sold 154,700 2018 Sales returns Refund liability 6 2018 Inventory-estimated returns Cost of goods sold Required 1 Required 2 >