Question

III 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 2021 with a refund liability of $460,000. During 2021, Halifax sold merchandise on account for $13,100,000. Halifax's merchandise costs is 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 2021, and the rest being merchandise sold during 2021. 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 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. 2. What is the amount of the year-end refund liability after the adjusting entry is recorded? Complete this question by entering your answers in the tabs below. Required 1 Required 2

Answer 1

Page No ③ Anyaret 0 Journal entries @ Inventory = $358000 60 % =$214800 | © Sales oreturns = 650,000 — 358000 = $292000 Inventory - 292000 X 60% = $145200 .. Inventory = $145200 © Sales returns = [(54.X 13,100,000) – 992000 + 35500 - 460,000 = (655000 -- 292000) + 358000 – 460,000 = 363000+ 358000 - 460,000 $ 261000 cost of goods sold = 261000 X 60 %. = $456600

Page No ③ I Gedit S.No Date Debit $358000 2021 $358000 $ 214800 2021 $214800 202 $ 292000 $292000 Particular Refund liability Accounts receivable Inventory Inventory - estimated returns Sales relarnos Accounts receivable - Inventory cost of goods sold Sales return Rebund liability Inventory - estimated relirns Court of goods sold 2031 $175200 $145200 © 2021 $261000 $261000 2021 $156600 $156600 fear and rebond liability -164.813,100,000) – 29.2000] = (655000 -- 293000) is $363000

Page: No Retund liabilily Beg.bal} 460,000 @ 358000 ૨૬too dukm 358000 End bal 363000 i Ending balance in šefund liability = $363000|