Question
Hoover Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All
Hoover 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 Hoover's sales are for credit (no cash is collected at the time of sale). The company began 2021 with a refund liability of $450,000. During 2021, Hoover sold merchandise on account for $13,000,000. Hoover's merchandise costs it 65% of merchandise selling price. Also during the year, customers returned $514,000 in sales for credit, with $283,000 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. The amount to adjust the refund liability to its appropriate balance at year-end would be:
A)252,000
B)231,000
C)167,000
D)122,00
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