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 $400,000. During 2018, Halifax sold merchandise on account for $12,500,000. Halifax's merchandise costs it 70% of merchandise selling price. Also during the year, customers returned $613,000 in sales for credit, with $338,000 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 refond liability after the adjusting entry is recorded? Record the cost of merchandise returned for goods sold during 2018. Accounts receivable 338,000 2 2018 238.000 Inventory Inventory estimated returns 236,600 3 2018 275,000 Sales returns Accounts receivable 275,000 236,000 4 2018 Inventory Cost of goods sold 236,000 338,000 5 2018 Sales retums Refund liability 236,600 6 2018 Inventory-estimated returns Cost of goods sold Ending balance in refund liability $ 410,000 X