70.2K

Verified Solution

Link Copied!

Halifax Manufacturing allows its customers to return merchandise for any reason 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 $$11,500,000.$ Halifax's merchandise costs it $65\%$ of merchandise selling price. Also during the year, customers returned $$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. $\backslash$table$[[$No$,$Year,General Journal,Debit,Credit$],[1,2024,$Refund liability,$(>),250,000,],[,,$Accounts receivable,$(,,250,000],[,,,,,],[2,2024,$Inventory,$(>),162,500,],[,,$Inventory$-$estimated returns,$,,162,500],[,,,,,],[3,2024,$Sales returns,$(,200,000,],[,,$Accounts receivable,$(,,200,000],[,,,,,],[4,2024,$Inventory,$(,130,000,],[,,$Cost of goods sold,$(,,130,000],[,,,,,],[5,2024,$Sales returns,$,210,000\backslash$times $,],[,,$Refund liability,$(>),,210,000\backslash$times $],[,,,,,],[6,2024,$Inventory$-$estimated returns,$(>),,]]$

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?

Answer & Explanation Solved by verified expert

See Answer