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E 7-8 Sales returns L07-4 Halifax Manufacturing allows its customers to return...

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Accounting

E 7-8 Sales returns L07-4
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 2024 with a refund liability of
$300,000. During 2024, Halifax sold merchandise on account for $11,500,000. Halifaxs merchandise costs are 65% of merchandise selling
price. Also during the year, customers returned $450,000 in sales for credit, with $250,000 of those being returns of merchandise sold prior
to 2024, and the rest being merchandise sold during 2024. Sales returns, estimated to be 4% of sales, are recorded as an adjusting entry at
the end of the year.
Required:
Prepare entries to (a) record actual returns in 2024 of merchandise that was sold prior to 2024; (b) record actual returns in 2024 of
merchandise that was sold during 2024; and (c) adjust the refund liability to its appropriate balance at year end.
What is the amount of the year-end refund liability after the adjusting entry is recorded?
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