Question

Helo Save & Exercise 7-8 Sales returns (L07-4) points 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 an allowance for sales returns of $300,000. During 2018, Halifax sold merchandise on account for $11,500,000. This merchandise cost Halifax $7,475,000 (65% of selling prices). Also during the year, customers returned $450,000 in sales for credit. Sales returns, estimated to be 4% of sales, are recorded as an adjusting entry at the end of the year Hint Print Required: 1. Prepare an entry to record actual merchandise returns as they occur (not adjusting the allowance for sales returns), and then record a year-end entry to adjust the allowance for sales returns to its appropriate balance. 2. What is the amount of the year-end allowance for sales returns after the adjusting entry is recorded? References Complete this question by entering your answers in the tabs below Required 1 Required 2 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.) View transaction list Debit Credit No Year View journal entry worksheet General Journal Refund billy Accounts receivable 2021 < Prev 4 of 7 Next >

help with journal entries

Answer 1

1.

No	Year	General Journal	Debit	Credit
1	2021	No entry for prior sales (there no prior sales returns)
2	2021	No entry for prior sales
3	2021	Sales Returns	450000
		Accounts Receivable		450000
4	2021	Inventory [450,000*65%]	292500
		Cost of goods sold		292500
5	2021	Sales Returns [(11,500,000*4% ) - 450,000]	10000
		Refund liability		10000
6	2021	Inventory -estimated returns [10000*65%]	6500
		Cost of goods sold		6500

2. Year end allowance = 300,000 +10,000 = 310,000