Question

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. 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? 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 Journal entry worksheet < 1 2 3 4 5 6 Record the actual sales return of merchandise sold prior to 2021. Note: Enter debits before credits. Year General Journal Debit Credit 2021 Record entry Clear entry View generalioumal

Answer 1

Requirement 1 General Journal Debit Credit Year Sales Returns $ 4,50,000 2018 $ 4,50,000 Refund Liability (Actual sales returns) Allowance for Sales returns Sales returns (adjustment to allowance for sales returns) $ 2018 3,00,000 $ 3,00,000 Sales Returns (11500000* 4%)- 150000 Allowance for Sales returns (To record current year adjustment entry) $ 2018 3,10,000 $ 3,10,000 Invnentory-estimated returns (310000* 65%) Cost of Goods sold (To record cost of goods sold transfer) $ 2018 2,01,500 2,01,500 Requirement 2 $ Beginning balance 3,00,000 $ () Adjustment for last year made -3,00,000 $ () Current year created (11500000*4%) 4,60,000 $ ) Adjustment for current year -1,50,000 Ending balance in year end allowance 3,10,000